Friday, December 09, 2011

Green Utilities

There is more than one way to play the shift from fossil to renewable energy.  I decided to look at a group of the largest USERS of energy  -  the electric utilities  -  to find the greenest of the power producers.  It occurred to me that I was not the first to ask that question and quickly found a list of the top ten “green” utilities published by the National Renewable Energy Laboratory.

1.  Austin Energy (private)
2.  Portland General Electric (POR:  NYSE)
3.  Pacifico (PPW-P:  Nasdaq)
4.  Florida Power & Light (private)
5.  Sacramento Municipal Utility District (community owned)
6.  Xcel Energy (XEL:  NSE)
7.  National Grid, Plc (NGG:  NYSE)
8.  Basin Electric Power Cooperative (community owned)
9.  Puget Sound Energy (private)
10.  OGandE Electric Services (OGE:  NYSE)

Candidly I was a bit surprised to find that half the list is made up of municipal, cooperative or otherwise privately held entities.  I expected the list to be composed mostly, if not entirely, by large publically traded utilities, which have put quite a bit of effort into burnishing a “green” reputation for both consumer and investor brownie points.

Are utilities with a head start in embracing renewable energy in a better position competitively?  Are their revenue and profits more sustainable having already begun the shift from fossil fuel to a mix of energy sources?  Regardless of your view on the threat of global warming or even your political views on the U.S. dependence upon imported oil, there is a move underway toward renewable fuels, which is not likely to reverse in the near or even mid-term.  Accordingly, I answer both these with "yes, better positioned" and "yes, more sustainable earnings."

If I am correct then these publically held leaders could present compelling investments for investors.  We will be looking at each  -  POR, PPW-P, XEL, NGG and OGE  -  to find the investment case...if there is one.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.


No comments: