Investing is not rocket science, but if we ignore the actual numbers behind it, then predictions become nothing more than conjecture. The reality is that natural gas has greatly increased its dominance as a source of U.S. energy, while renewables are only inching along.
US Coal Consumption data by YCharts.
The Natural Gas Miracle
Natural gas is now the country’s largest energy source. The nation is producing so much natural gas that people have started to talk about exporting it.
It would be quite foolish to ignore to ignore the politics of any investment. Some important figures in Washington are proposing restrictions on liquefied natural gas (LNG) for export.
Cheniere Energy, Inc. (NYSEAMEX:LNG) is the one company that has the government’s approval to export natural gas. The company is still in building its facilities, and 2016 is the earliest that full commercial operations could start.
Cheniere Energy, Inc. (NYSEAMEX:LNG) has already signed 20-year contracts with Chevron and Total. Cheniere Energy, Inc. (NYSEAMEX:LNG)’s in a great position here, because it charges a fee of $0.28 per million British thermal units (MMBTU) just to reserve export capacity, plus a fee of $0.04/MMBTU for operating expenses. This fee structure helps to decrease the company’s risk and provide stable and steady income.
Its large total debt-to-equity ratio of 4.25 appears alarming, but the steady nature of the business and significant political barriers to entry make the debt load bearable. The company is not profitable, but it has a great business model and is a good company to watch.
Renewables Are Just Inching Along
Renewable energy is a very popular topic, and it appears quite frequently in the news. But for all of the talk about a green revolution, the consumption figures show that renewable energy use has been expanding at a snail’s pace. Together, sources like solar, wind, geothermal generate around half the amount of energy generated from coal alone.
With the aim of decreasing total costs, SunPower Corporation (NASDAQ:SPWR) focuses on highly efficient cells. More efficient cells require less real estate and have lower installation costs. SunPower’s total debt-to-equity ratio of 0.83 appears high, but it has the backing of the large multinational Total.
Overall, SunPower Corporation (NASDAQ:SPWR) has a five year revenue growth rate of 23.89% and is expected to see earnings of $0.66 per share in 2014. Given its technological advantage, healthy revenue growth, and profitable future, SunPower Corporation (NASDAQ:SPWR) is one of the better solar investments available.
Duke Energy Corp (NYSE:DUK) is a major utility and a significant producer of renewable energy. It has 3,200 megawatts of hydroelectric capacity. It also has more than 1,000 megawatts of wind assets. Duke’s growing smart grid allows customers to use decrease their electricity use with better monitoring services.
This utility is progressive, offering a stable way to invest in America’s changing energy infrastructure. It continues to embrace new technology, and as the economics of renewables improve, it will be ready to further diversify its generational capacity. Its total debt-to-equity ratio of 0.97 is reasonable for a company in the stable utility business. Its profit margin of 9.1% is in line with the industry average, while its yield of 4.2% is a nice gift for investors.
Conclusion
Natural gas has seen a strong resurgence, and Cheniere Energy, Inc. (NYSEAMEX:LNG) is in a great place to profit from the export of LNG, with long-term contracts already signed. Renewables have not grown anywhere near as fast as natural gas, but SunPower Corporation (NASDAQ:SPWR) is a strong solar investment. Its advanced technology and focus on decreasing overall costs shows that it is thinking of its customer’s needs. Duke is a stable utility, and it provides a simple way to buy a piece of wind, solar, and smart grid assets.
These three companies are fundamentally strong firms and good investments to watch as America’s energy consumption evolves.
The article Where Does America Get its Energy From? originally appeared on Fool.com and is written by Joshua Bondy.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
