Constellation Energy Group

Constellation Energy Group is among the world’s largest Independent Power Producers and Energy Traders sector businesses in the world.  Constellation Energy Group’s employees generate $1.018B in profits on $19.481B of revenue.  Global output in the Independent Power Producers and Energy Traders business will likely rise substantially over the next 10 years.  Long-term economic growth may lift all boats, but Constellation Energy Group is determined to remain a market leader.  Sectoral leadership in the Independent Power Producers and Energy Traders segment takes dedication and consistency, but management seeks out-sized growth.

Constellation Energy Group’s ticker symbol CEG has recently been trading near $88.21 a share.  The Constellation Energy Group corporate headquarters in Baltimore, MD predicts Independent Power Producers and Energy Traders profits will satisfy shareholders in search of risk-appropriate returns.

The significance of market volume is sometimes ignored, but with a total market capitalization of $15.905B ensures sufficient liquidity.  With a beta of 0.10, the company is less volatile than the market as a whole.  When the average equity moves lower, Constellation Energy Group moves less aggressively.

Duke Energy

Duke Energy's power plants provide electricity to North Carolina, South Carolina, Kentucky, Ohio, and Indiana. The company also has assets in Canada and Latin America, but it is Duke Energy's ability to leverage its nuclear, coal-based, and hydroelectric generating plants that sets the company apart.

In April 2007, the company lost a long-running lawsuit with the Environmental Protection Agency over compliance with the Clean Air Act. The unanimous verdict struck a severe blow to the company's carbon emitting coal power plants, but Duke Energy's experience running a number of nuclear power stations puts the company in an excellent position going forward.

Since March of 2006, Duke Energy has been working on a new nuclear power plant in Cherokee County. In recent years, nuclear power has appeared to be a dying technology. Aggressive environmental regulations have effectively killed any proposed nuclear power plants for the last thirty years. But now that increased awareness of the threat posed by global warming has turned nuclear power into a new "green" alternative.

Electric power generating utilities are heavily regulated by the government. Profits tend to be limited by a popular unwillingness to pay high rates for electricity. Yet the government effectively guarantees a reasonable level of profit to generators.

Electricity demand has been rising for years and Duke Energy is well-positioned to make effective new investments in nuclear power plants. The entire energy sector is in the midst of a tremendous cyclic boom and while utilities aren't going to be able to access the windfall profits that oil refiners and drillers will earn, the industry is immune to downward volatility and Duke Energy's conventional alternatives to oil and gas will benefit from increased government interest. Duke Energy is a long-term buy, but fresh investment capital could likely be invested more profitably elsewhere in the energy sector.

Coal

The fuel that powered the industrial revolution is not typically put forward as the likely successor to today's oil-based economy. But in an energy-intensive economy trying desperately to free itself from foreign supply disruptions, coal is poised to play a central role in near-term energy production.

Nuclear energy has been effectively hamstrung by excessive regulation and an aggressive environmental movement. Wind and solar don't even offer a competitive price and suffer from reliability issues. With world oil production prone to disruptions from inaccessible, unstable foreign nations, coal offers a compelling alternative.

While "clean coal" is still a slogan rather than a reality, the basic technology is proven and the environmental trade-offs well-understood, if unsavory. The United States has massive supplies of coal that provide substantial independence from foreign entanglements. Just as importantly, China is also home to enormous reserves. And while the United States is still hoping for a miracle energy source, China is moving forward with an ambitious building spree. Putting a new coal-powered plant into service every week, China has already decided that the energy supply of its future will be coal.

Technology companies are fond of advertising their ability to offer tomorrow's business solutions today, but British Petroleum may need to change its ad campaign. The company likes to imagine that BP stands for "beyond petroleum", but the implication is all wrong. Biofuels and other alternative energy make for good public relations, but the simple truth is that coal is the most likely successor to oil.

Russia's Floating Nuclear Power Plants

Reuters reports that Russia has begun construction of the world's first floating nuclear power plant. The idea is to create a 70 megawatt nuclear reactor that literally floats in the ocean as it produces power and desalinates seawater.

Russian officials are already talking about the potential for export. They say their idea is a good way to power much of the third world without spreading nuclear knowledge.

Anti-Nuclear forces are alarmed. If Russia turns nuclear power into a commodity like commercial airplanes, the potential for accidents like Chernobyl dramatically increases. The notion of a floating reactor is exceedingly alarming in particular. The spectre of a nuclear power plant being hit by an iceberg or capsizing in a fierce storm has been totally unknown until now.

The environmental record of nuclear reactors at sea is surprisingly good. The United States and Russia both employed fleets of nuclear powered submarines without incident. In fact, the Russian sub Kursk suffered an explosion and sank without causing appreciable damage to its reactor. Specialists suggest that the reactor could have been immediately restarted after the disaster.

Nuclear powered icebreakers have also been forging northern sea lanes for years without iceberg troubles.

But the Russian government is likely to move ahead anyway. Look for heavily government influenced companies like Gazprom to be peddling floating nuclear power stations to India and other countries within just a few years.

Japan looks to Kazakhstan for Uranium Supply

The IHT reports that Japan is trying to purchase stakes in uranium mines in Kazakhstan and Russia in order to protect itself from surging uranium prices driven by higher Chinese energy demand. In contrast to the United States, Japan already derives 30% of its power from nuclear energy. But a plan to curb carbon dioxide emissions has Japan planning to increase its reliance on atomic energy to approximately 40%.

Uranium prices are currently at a record $113 a pound, and even without an increase in demand, prices are likely to rise further due to problems with mines in Australia and Canada. A global effort to address greenhouse gas emissions will only exacerbate an annoying supply bottleneck.

As a practical matter, uranium production will never run up against the natural limits that face fossil fuels both because there is plenty in the ground and because uranium is so energy dense. But uranium mines have been floundering for decades because they simply weren't terribly profitable investments if no one in the richest country on earth wanted to buy any.

Now that companies like TXU are considering expanding nuclear power again within the United States, the prospect for higher margins for uranium mines looks good. Take a look at this chart from The UxC Consulting Company, LLC:

Are More Nuclear Power Plants in Our Future?

CNN reports that TXU, a utility company acquired by two private equity firms earlier this year, is working to build the largest nuclear power plants in the country. Something big must be under way in Texas, because the Wall Street Journal suggests that at least three other utilities are considering building nuclear power plants in Texas.

No new nuclear power plants have been built in the United States in decades, but TXU has apparently been consulting with Mitsubishi Heavy Industries of Japan who would build the reactors, so there might actually be fire at the bottom of all this smoke.

The global warming debate has cast nuclear power into a sudden environmentally friendly light. If people are really more worried about global warming than nuclear accidents or terrorism, then the country might follow the French model which derives the vast majority of electrical power from nuclear energy.

The more capitalistic angle on this renewed interest in nuclear power questions what impact private equity has had on TXU's priorities. If private equity's ability to focus on long-term profits has allowed TXU to finally act on long simmering plans, this could have major repercussions for the economy as a whole. In a world where private equity is capable of even considering spending $50 billion for Dow Chemical, no public company is safe.

Greater willingness to take on spectacular risks will undoubtedly result in higher eventual payoffs for everyone in society, but the financial disasters will be larger too. Society just needs to make sure that the risks remain purely financial and not allow private business to avoid appropriate technological safeguards.