Cheniere Energy, Inc. (LNG), Atlantic Power Corp (AT) & Duke Energy Corp (DUK): Three Losers From Natural Gas Exports

Natural gas wannabe exporters scored a huge win last week when the Department of Energy (DoE) gave the green light a second LNG facility for exporting gas to countries that are not in a free trade agreement with the U.S. Natural gas exports could pave the way for a domestic energy economy revival – but there could be major losers, too. I outlined three winners in my last article, but now let’s take a look at potential losers.

The perfect price storm
The energy assets of the U.S. are not prime examples of sustainability, from either an economic or environmental perspective. But a new April estimate from the Potential Gas Committee puts domestic natural gas reserves at a whopping 2,384 trillion cubic feet. That’s 22% higher than 2010 estimates and, at current consumption levels, enough energy to power the U.S. for another 105 years.

But if this latest report from the DoE is any evidence, America isn’t keeping its gas to itself. After approving Cheniere Energy, Inc. (NYSEMKT:LNG)‘s Sabine Pass Terminal in 2011, the department gave the green light to a new $10 billion Freeport LNG project.

While natural gas exports could increase U.S. energy independence, reduce our trade deficit, and improve our overall economy, several stable utilities could feel a price squeeze like never before.

In the past year, natural gas has jumped 50% in price, and exports could keep those numbers headed higher. By opening up domestic gas supplies to a larger international audience, demand could balloon while supplies are sucked lower and lower.

Henry Hub Natural Gas Spot Price data by YCharts

We’ve already seen some evidence of how higher natural gas prices hit utilities hard this past quarter. Exelon Corporation (NYSE:EXC) took a $235 million one-time hit from bad hedges, while PPL Corporation (NYSE:PPL)‘s unregulated earnings dropped more than 50% from natural gas’ unnatural rise.

From a long-term perspective, utilities with major domestic natural gas assets could lose major cost competitiveness. While companies like Dominion Energy or Sempra Energy (NYSE:SRE) are poised to export, nationally focused natural gas utilities won’t be so financially fortunate.

Atlantic Power Corp (NYSE:AT) currently relies on natural gas for 58% of its generation capacity, and is focusing its future on natural gas and renewables as its energies of choice.

Source: Atlantic Power 10-K

Duke Energy Corp (NYSE:DUK) isn’t doing too well, either. The company uses natural gas and fuel oil for 37% of its regulated generation, and 42% for its unregulated division.

Source: Duke Energy 2012 Sustainability Report

TECO Energy, Inc. (NYSE:TE) is known for its coal-centric capacity and ownership of Appalachian mines, but the company relies on natural gas for 39% of its overall generation.