Exelon Corporation (EXC), Duke Energy Corp (DUK): The Scariest Graph for Utility Investors Everywhere

Page 1 of 2

Keep your lights on and your fridge open if you know what’s good for your investments. According to a recent report, electricity demand growth is dropping – fast. Let’s take a look at the numbers, and whether this report is fuel on the fire for this overvalued sector.

Going, going, gone

In the 1950s, the U.S. experienced electricity demand growth rates of 10%. That’s greater than China’s current GDP growth and smacks of yesteryear economic prosperity, when Mr. and Mrs. Smith probably did leave their lights on.

Since 2000, electricity demand growth has averaged a minuscule 0.7% per year, and dropped into the red for the first time since WWII during the Great Recession. The Energy Information Administration’s (EIA) projections for the next 40 years don’t look any peachier. From now through 2040, annual growth rates are expected to hit just 0.9% a year, just over a third of our currently estimated GDP growth rate.

Source: EIA.gov

So why, then, have utilities stocks been skyrocketing over the last year? And why shouldn’t investors be listening to overvaluation fears of utilities bears? In two words: creative destruction.

Exelon Corporation (NYSE:EXC)

Growth isn’t everything

The era of baby boomer electricity use is over, but utilities are making major moves to keep bottom lines intact as top-line growth fizzles. This is a good move for utilities everywhere. Electricity use comes and goes with economic fortune and failings, and the only way utilities can keep pulling profits is to improve their own efficiency.

Exelon Corporation (NYSE:EXC) is the nation’s largest owner and operator of nuclear energy, with just over 19,000 MW of nuclear capacity comprising 55% of the utility’s total energy portfolio.

Source: exeloncorp.com

The company announced last week that it has filed renewal applications for two of its nuclear power stations, which collectively account for 13% of Exelon Corporation (NYSE:EXC)’s overall capacity and 24% of its nuclear energy. The applications are likely to be approved, allowing Exelon Corporation (NYSE:EXC) to prolong the life of its current capacity without adding on unnecessary (and expensive) major new projects.

Similarly, Duke Energy Corp (NYSE:DUK) recently announced that it would hold off on new North Carolina nuclear facilities the utility had previously been pushing. “Our most recent forecast indicates two additional nuclear units at Harris will not be needed in the next 15 years,” noted Duke Energy Corp (NYSE:DUK) President Dhiaa Jamil in a statement. Instead, the utility will continue to make the most of its $9 billion modernization project, which includes combined-cycle and “clean coal” plants.

More recently, improved technology and production tax credits have pushed power companies to ramp up their renewables efforts. It should come as no surprise that NextEra Energy, Inc. (NYSE:NEE) is adding on to its 10,000 net MW of wind capacity with General Electric Company (NYSE:GE)‘s  newest turbines, but other traditional companies are making the renewables leap, as well. Atlantic Power Corp (NYSE:AT) bought a renewables business from Veolia Environnement SA (ADR) (NYSE:VE) in 2012 that added 150 net MW of wind to its power portfolio. With over 350 net MW of wind power and 195 MW of biomass under its belt, the “growth by acquisition” utility is trying its hand at renewable energy efficiency.

Source:nexteraenergyresources.com

American Electric Power Company, Inc. (NYSE:AEP) was recently awarded accolades for the successful completion of its new 600 MW “clean coal” power plant. With a $1.7 billion price tag and seven years of regulatory battles to boot, this new facility promises to be the most efficient coal energy converter to date. Its “advanced ultra-supercritical steam cycle technology” will squeeze more from less, converting 39% of low-sulfur coal’s energy into electricity.

Source: AEP.com

Don’t keep your lights on

Economic recessions are never a good thing, but in this case, it’s caused power companies to take a critical closer look at their production processes. Whether it’s improving efficiencies or carefully calculating new expansions, utilities know that less can still mean more.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!