F4Q08 Earnings Call

This is my detailed analysis of Integrys Energy Group (TEG). Below are some highlights:

Company Description: Integrys Energy Group, Inc., through its subsidiaries, operates as a regulated electric and natural gas utility company in the United States and Canada. It purchases, generates, and distributes electric power; and purchases and distributes natural gas.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

Bill Gates can’t live without his.  Factory workers in Xiamen need it.  Nomads on the Sahara desert fought wars over it.

It’s more important than oil.

Michael O’Higgins brought us the "Dogs of the Dow" strategy which he featured in his 1992 book, Beating the Dow. The basic premise of the strategy is selecting blue chip stocks which are out of favor but have a history of stable dividend policies and the ability to survive the troughs of any economic business cycle. For patient investors, the strategy has been profitable and able to outperform the Dow the majority of the time.

As a spin off and effort to broaden the number of blue chip candidates for screening, Hillbent combines the 30 Dow Industrials, 20 Dow Transportation, and 15 Dow Utility stocks to come up with the "Dirty Dozen". This group represents the 12 highest dividend yielding stocks amongst the Dow Jones 65 composite index.

Nevada is more than Las Vegas. Its banking and finance industries are very strong, as is also the construction industry, but there is yet a lot more. Check out the following interesting facts:

1. Nevada is a state without usury limits, which has attracted many credit card companies to establish in the state.
2. After California, Nevada produces the most geothermal energy in the nation.
3. Nevada produces about 10% of the world’s gold supply.
4. Nevada has no corporate income tax.
5. No franchise tax
6. The state has no personal income tax.
7. There is no state tax.
8. Nevada permits one-individual corporations.
9. There are more than 300,000 companies incorporated in the state of Nevada.
10. The state does not require that the directors of a company be stockholders.

The following companies have market caps of over $1 billion, and are headquartered in Nevada:

Utility and pipeline stocks not only outperform during economic downturns but stock market recoveries as well, so investors should consider hedging their bets and play the recovery without risking performance.

The group typically leads a stock market rally by one or two months and the sees a similar jump as the market during the early stages of a recovery, Canaccord Adams analyst Bob Hastings told clients. This recovery could last several months or more than a year depending on the downturn.

Q2 2008 Earnings Call Transcript

In this post, let's discuss the top 10 European utility companies and their ADR stocks.

For our analysis, we'll use the Dow Jones STOXX® 600 Utilities Index as the proxy. This contains all the largest utility companies of Europe. There are a total of 33 components in this index. The components are:

Solar Industry, ETF Prospects Shine As More Adopt Alternative Technology

Solar company LDK (LDK) predicts it will put up numbers this year that could shine a light on ETFs.

The company offered an upbeat 2009 revenue outlook, because its expansion of wafer production is ahead of schedule, according to the Associated Press. Analysts expect its full-year revenue to hit $2.43 billion next year.

One way to analyze electric utility stocks is to look at what types of fuel they use to run their generators, and how much exposure to oil and natural gas that they have. If you believe the price of oil and gas has peaked and will continue to drop, then it may be time to take a close look at the electric utility stocks with the highest usage of these fuels.

Pinnacle West Capital Corp. (PNW) has one of the heaviest exposures, with 24% of their electric energy coming from oil and natural gas. About 35% comes from coal and 21.5% from nuclear. This Phoenix, Arizona based company has a PE of 10, a PEG of 3.55 and a yield of 6%.

Q2 2008 Earnings Call Transcript

F3Q08 (Qtr End 06/30/08) Earnings Call Transcript

We have quite the huge announcement from Sunpower (SPWR), Optisolar and PG&E (PCG) after hours.

This is a long term game changer if the utilities themselves decide to go solar as opposed to individual and corporations. Sadly our Congress still sits on their hands on the renewable tax credits for alternative energies while the rest of the world moves onward. California is trying to move on, with or without the rest of the U.S.

Pacific Gas & Electric (PCG) this afternoon announced two contracts for a combined 800 MW of solar power. The two deals will provide 1.65 billion kilowatt-hours of electricity, enough to serve 239,000 residential homes. PG&E signed a deal for 550 MW of thin-film photvoltaic solar power with Topaz Solar Farms, a unit of OptiSolar, and a second deal for 250 MW with High Plains Ranch II, a unit of SunPower (SPWR).

Both projects are contingent upon the extension of the federal investment tax credit for renewable energy, which is due to expire at the end of the calendar year.

American Water Works Co., Inc. (AWK) reported earnings on Monday and the report was well received by investors.  The stock rallied to close at $20.77 and has spent the week trading just below the IPO price of $21.50.  Revenues for the second quarter came in at $589.4 million which is up 5.4% over last year.  Interestingly, the volume of water sold actually decreased by 2.7% but the average prices per gallon made for a gain in revenue.  Flooding in the Midwest caused a reasonable decline in demand and analysts noted that additional rainfall in the early parts of the third quarter could continue to dampen volume rates.

Net income came in at 28 cents per share compared to 31 cents last year.  The difference was primarily due to higher expenses as the company attempts to upgrade infrastructures within the different municipalities in which it operates.  Zachstocks covered AWK soon after the IPO and explained the concerns over these expensive projects.  The additional expenses were primarily to benefit the company’s regulated business which can lead to uncertainty regarding future earnings.  With regulated business, the company must request permission to raise rates on water in order to pay for its investment.  There is no guarantee that the company will receive the particular rate increases it is requesting.  Municipalities could grant smaller increases or no additional price improvements at all.

Q2 2008 Earnings Call Transcript

Q2 2008 Earnings Call Transcript

Q2 2008 Earnings Call

Q2 2008 Earnings Call

As expected, A123 Systems filed a registration statement for a planned $175 million IPO last Friday. I believe the A123 IPO, together with recent industry reports by Merriman Curhan Ford and Lux Research, will begin to draw attention to the energy storage sector in a whole new way and mark the beginning of a major upward trend in a basic industry that's been undervalued for years. While it seems that nobody really wants to talk about batteries in a wired world, the fact is we couldn't be wired without them. And as we shift to alternative energy and electric vehicles in response to high oil prices, the demand for many energy storage technologies is likely to soar.

Today I'm going to venture a little out of my depth and try to provide a simple primer on energy storage for the electric utility grid. I'm not seeking perfection in this endeavor and will be happy with B- grades from the power professionals and engineers out there. My goal is to try and establish a baseline context for discussion and analysis, show why I believe some unloved companies are likely to be big winners.