Utilities give clean energy investors a boost over solar: Maguire
The opinions expressed here are those of the author, a columnist for Reuters.
By Gavin Maguire
LITTLETON, Colorado, Aug 15 (Reuters) -Investors in the clean energy sector have taken a drubbing from steep drops in solar stocks this year, but have made strong returns on positions in utilities, which have been one of the brightest spots in the United States equities arena in 2024.
Surging demand for power from artificial intelligence (AI) applications and data centers have spurred investments across the utilities and power producer space, which is set to see rising revenues from all major customer segments going forward.
Some utilities stocks have outshone even the brightest stars of the tech arena, with Texas-based power producer Vistra Corp VST outperforming microchip major Nvidia NVDA.O since March.
Equity analysts are upbeat on the outlook for utilities for the rest of the year, especially if U.S. interest rates are lowered and reduce the cost of debt financing for infrastructure development, service expansions and grid upgrades.
That positive forecast contrasts with that of the solar industry, which was rocked by a high-profile bankruptcy this month that may spark a pivot by clean energy investors into the utilities arena instead.
DIVERGENCE
The bankruptcy filing by SunPower SPWR.O is just the latest blow to the solar arena.
The 40-year-old firm boasted a market capitalization of over $9 billion in early 2021, but agreed to sell off the bulk of its assets for $45 million in cash this month after racking up billions of dollars in debt.
Solar installation firms have been hit over the past two years by rising interest rates that lifted system prices for potential buyers, steep cost inflation for parts and labour, and cuts to power sale prices in key markets.
And the pain of the solar sector stretches well beyond the U.S., with Israeli firm SolarEdge and China's Longi both announcing layoffs this year.
The price of the largest U.S. solar exchange-traded fund (ETF) - the Invesco Solar ETF TAN - has lost 24% so far this year in reflection of the sector's woes, and is down 55% since August 2022.
In contrast, the largest utilities ETF, the Utilities Select Sector SPDR Fund XLU, has gained roughly 18% year-to-date, which is more than the gains posted by the popular Vanguard Information Technology ETF VGT over the same period.
NUCLEAR GROWTH
The upswing in utility share prices extends well beyond Vistra, with Constellation Energy CEG.O and NRG Energy NGG both posting gains of well over 50% year-to-date.
Nextera Energy NEE, Southern Company SO and American Electric Power Company AEP.O have all gained around 20% this year, and may make further progress if investors in the solar sector pull up stakes and opt to switch holdings to utilities instead.
Exactly which companies are targeted by investors in the utilities arena may depend on the proportion of power generated by nuclear plants within each power system.
So far this year, the shares of Vistra and Constellation have outperformed the rest of the sector because both companies generate a larger share of total power supplies from nuclear reactors than their peers.
Utilities with large nuclear fleets are attractive to power-hungry firms because nuclear plants can deliver large and stable volumes of clean power around-the-clock, and so can fulfil the demand needs of companies that require massive computing power.
However, power producers that are building out renewable energy generation capacity as well as battery storage systems will also likely be on the radars of power consumers that need abundant clean electricity supplies.
That means that utilities that may lack nuclear generation but have plans for large increases in alternative forms of clean generation could see a rise in demand for power going forward.
Equity analysts have flagged firms including NiSource NI, which has a service area spanning from Pennsylvania to Ohio, and Florida-based NextEra as firms with strong growth potential thanks to rising revenues and established plans to bring on more renewable power this decade.
Duke Energy DUK, which has a large generation footprint in the Carolinas, and Southern Company, which operates across Georgia, Alabama and Mississippi, are also regularly touted by stock analysts in the utilities space.
Investors opting for basket exposure through an ETF also have plenty to choose from, with Vanguard, S&P Global, Fidelity, and Invesco all also offering dedicated utility ETFs.
Given that clean energy investors are nursing losses in the solar space for the second straight year, some may be tempted to steer funds elsewhere in the energy sector where the outlook is far more upbeat.
And given that nearly all utilities are developing and integrating growing volumes of clean power into their distribution systems, many will fulfil the criteria for clean energy investors even if they are not purely dedicated to renewable energy production.
<The opinions expressed here are those of the author, a columnist for Reuters.>
Key US utility ETF outperforms solar, wind and even tech ETFs so far in 2024 https://tmsnrt.rs/3YMvgru
Year-to-date stock price moves of key utilities & power producers https://tmsnrt.rs/3YLxJ5b
Solar’s rough run https://tmsnrt.rs/4dJ931v
Major utilities exchange-traded funds (ETFs) https://tmsnrt.rs/4fIjbJL
Reporting by Gavin Maguire; Editing by Stephen Coates
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
