So believe it or not, Exelon is a fairly well-run generating company. Their nuclear fleet posts some pretty darned high reactor uptimes relative to other firms. Nuclear has always been a cheap way to generate electricity (after the plant is built), and many of our sites are dual 1100 MW reactors, giving Exelon some of the cheapest sites in terms of operating costs.
The problem over the past few years is that electric rates have been incredibly low, especially in the eastern half of the US, where all of our plants are located. The company had to cut the dividend to prioritize debt service. And all of a sudden, nuclear didn't look so cheap when it was hard to give natural gas away for free.
Now we're seeing the second and third order responses to the natural gas boom. Producers are cutting back on new wells. There's been a huge expose on issues in the Eagleford shale and other air pollution issues. It seems that Obama's EPA may get involved at some point. That's driving natural gas prices higher and consequently electric prices along with it.
At $4/therm in the long-term delivery market, Exelon can make decent money. That's before we get to any benefit from CO2. And the runup in spot natural gas prices means sentiment on EXC may be starting to swing from apocalyptic to merely pessimistic.
BIP posted good FFO numbers but it also took a $275 million impairment on its natural gas distribution business. On the one hand, I think the market wants to see accounting profits in addition to FFO. If you buy economically depreciating assets, that has to count against whatever value in the FFO you create.
The firm is trading at a 5.4% distribution yield. I don't think it's a bad buy. I don't think the forestry and utilities businesses are going anywhere, but I do think the market is looking for an end to these writedowns, and the scrutiny has gotten tougher since some questions have arisen regarding BIP's accounting practices.
I want to be clear that there is a difference between depreciation and an impairment. An impairment is often done to reflect a decrease in the economic value of an asset. If you post $200 M in FFO but take a $300 M impairment, economically, you've lost $100 Million. Of course, you generally can't impair an asset below zero, especially if you're protected by limited liability, but will these impaired assets generate the same FFO? I think it's fair here for the market to take the impairment seriously.
One last point is that the market in general has been down for the past month. BIP has come down roughly in line with the market. Moreover, BIP has a lot of international exposure, especially to Latin America and indirectly to China through its Australian commodities assets. The BRICs have fallen about 10% since December, and BIP, as a more conservative utility with exposure to Chile, Brazil, and China, has fallen about 7%.
I think ~$36 is a fair price for BIP given the market and the impairment/accounting concerns. It might even be a good price to buy at, but I'm not sure. But I wouldn't get too down on yourself for the macro factors or writedown, assuming you've (correctly) put BIP in the international basket of your portfolio.
It's called pumped storage. Why waste billions on battery research when we can store large volumes of water in a hill above a river, lake, or ocean? You guys are ~60 years too late to the energy storage game.
For the record, a large fed balance sheet makes it more difficult for these guys to keep the price of gold from going up. The Fed has $4 Trillion in commitments to print currency if necessary, which is posted against long-term assets like treasuries and MBS.
Sentiment in the miners has been incredibly bearish, but NEM traded yesterday like they're going to go BK.
I'm not selling at this level, but I'm not buying either. If you MUST buy, I'd just wait a few more days for the information to percolate through the market. I expect Monday and maybe Tuesday to be down days as the market moves further into overreaction territory and a few grandpas panic sell.
This isn't the bottom, but so long as NEM is producing at cash costs lower than the price of gold, we're getting very close.
BIP claims they don't generate UBTI. Also I think your Roth has to collect $1000 of UBTI in a year before your broker has to file. So a 200 share position would have a moderate risk of forcing you to file at worst.
"Brookfield Infrastructure is committed to structuring its operations to avoid generating UBTI and ECI" (page 27, Corporate Profile 2012; 2nd result on google when searching for Brookfield UBTI)
If you have a 3000 share position, it's probably worth keeping in a Roth to avoid taxes on distributions and the risk of your broker charging a $200 filing fee to report that 1 in 10 year that BIP generates UBTI is quite minimal relative to the taxes saved.
If you have 100 shares or less, you're probably never going to hit the $1000 filing threshhold. If you're somewhere in between, it's probably just wisest to hold it in an individual account. You get huge tax deferrals anyways, and I've never net-net paid anything close to my marginal rate for ordinary income on the distributions, even after paying taxes deferred to a sale.
One other interesting approach is an ETN like AMJ- JP Morgan will own the MLPs for you and promise to pay you interest equivalent to distributions. (However they charge a 0.89% management fee and it's backed only by JP Morgan's creditworthiness) This is terrible for indivdual accounts, but it could be a good idea for an ETN.
If the management fee were half what it is, and JPM had an agreement to hold collateral to protect the ETN in the event of default, I'd be a big proponent of it. As it stands, I'm less of a booster, but it could be a good idea for some people.
IIRC, Total's French refineries are loss-makers.
I am not sure how much more money (if any) they will lose if they shut down.
One of the problems with the French system is that it is impossible to lay anyone off. So we may be operating this plant past what the shutdown point would be in the US or UK simply due to employment obligations.
I wish the refinery workers well, but if we're losing money on refining, and if they're as stuck in this industry as we are, it's hard for us to offer raises.
Perhaps a contract offering them some equity in these god-forsaken European refineries would work.