What’s Going on With Exelon Corporation (EXC) Stock?

Yes, natural gas is displacing coal in the market, but I think its rise is a little exaggerated. The near doubling in natural gas prices forced many coal-fired power plants to resume operations last winter. That is good news for Duke Energy Corp (NYSE:DUK) and The Southern Company (NYSE:SO), which use coal for 46% and 38% of their generation portfolios, respectively. They, too, are suffering from low auction prices in natural-gas-heavy regions, but rising natural gas prices are good news for their futures. It is a little less obvious, but that is also good news for Exelon Corporation (NYSE:EXC). Should natural gas prices remain higher in 2016 — which seems pretty likely — I don’t think energy generators are going to sell their power at less than competitive prices. If PJM can adjust these prices upward in the future, then I fully expect that to happen.

Foolish bottom line
The downward pressure from the PTC will continue to weigh on margins for Exelon, but don’t expect it to last forever. Similarly, I do not see natural gas keeping Chicago power prices at 50% of historical prices. If I am wrong and this trend is the new normal, then Exelon will need to ditch some of its nuclear fleet (easier said than done) to become more competitive. However, I don’t think that the company’s nuclear-heavy portfolio is a long-term liability — quite the opposite really. All in all, I think Exelon is worth a look for long-term investors, especially at these prices.

The article What’s Going on With Exelon Stock? originally appeared on Fool.com is written by Maxx Chatsko.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and biotechnology.The Motley Fool recommends Exelon and Southern Company.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.