Utilities have been busy this past week, making moves to maximize profit potential. With nuclear and coal closures accompanying expanded transmission projects, here’s what you need to know to stay on top of your dividend stocks’ latest moves.
Mission for transmission
AGL Resources Inc. (NYSE:GAS) announced last Monday that its New Jersey regulators have given the thumbs-up to a $115 million natural gas infrastructure improvement project. The upgrades are expected to take four years to be completed, and an accompanying rate case request should cover construction costs. AGL Resources Inc. (NYSE:GAS) also received approval two weeks ago for a $275 million Georgia natural gas project.
In the latest transmission news, Westar Energy Inc (NYSE:WR) got the go-ahead Thursday to spend $66 million on an electric transmission project to increase reliability and efficiency in the area. Kansas regulators approved the project, along with recovery costs for the three- to four-year project.
Although natural gas additions have been ramping up lately, transmission projects overall have attracted the attention of many utilities. Their “tollbooth” business model can provide steady income with low operational costs, a welcome relief from the volatile world of competitive energy generation.
Can coal and nuclear cut it?
Natural gas has been choking coal’s competitiveness, but environmental groups have their own agenda against this energy source. After extensive litigation, Duke Energy Corp (NYSE:DUK) announced this week that it has reached an agreement with several major environmental groups over air permits at its Indiana Edwardsport coal-fired power plant.
Source: Duke Energy.
Generally speaking, the settlement puts in writing what Duke Energy Corp (NYSE:DUK) would probably be doing otherwise. It sets mandatory dates for coal retirement, provides opportunities for natural gas switchovers, and outlines the possibility for small-scale renewable power projects. The utility has already planned to retire 3,400 MW of coal-fired power generation, is eyeing new natural gas investments, and just bought one of the largest urban solar farms in California to add to its 100-plus MW of solar generating capacity.
Duke Energy Corp (NYSE:DUK) has also been opting out of proposed nuclear projects — and it’s not alone. Entergy Corporation (NYSE:ETR) announced this past week that it’ll take a $240 million hit to put a Vermont nuclear facility into early retirement. The utility cited cheap natural gas prices, high operational costs, and a tough regulatory environment as reasons for its “extremely tough call.”
Entergy Corporation (NYSE:ETR)’s decision to pull the plug might seem counterintuitive, considering the company’s $400 million in investments over the past decade and licensing approval through 2032, but nuclear power is an increasingly risky business. Uranium costs are headed higher as sourcing remains a tricky affair, and natural gas’ stubbornly low prices are killing the competitive outlook for many baseload energies.
