Utilities have had a relatively strong year in 2011, with the Utilities Select Sector SPDR Fund (XLU) showing a 15 percent improvement since January and an over 20 percent jump since its 52-week low, reached in early August. The relative safety and stability of utility stocks may be what attracted investors this fall as congressional budget fights and European debt woes lead to a volatile end of the year.
Dynegy, Inc. (DYN) Files for Bankruptcy
Dynegy is a Houston-based energy company that sells electricity via its 17 power plants in six different states. Dynegy, though, fell onto hard times this year and was forced to file for bankruptcy due to debts of more than $5 billion. However, the chapter 11 filing took an intriguing turn when Dynegy decided to protect its shareholders, including billionaire investor Carl Icahn, by strategically filing for bankruptcy with its subsidiaries while failing to do so for the holding company at the top. This means that, if successful, Dynegy will force its bondholders to take a serious write down on the company’s debt while protecting shareholders in the parent company. The move prompted immediate lawsuits, and this chapter in Dynegy’s story doesn’t appear to be over yet.
Buffett Buys in on Solar
Everything Warren Buffett does gets placed under a microscope, so it should come as no surprise that the decision to purchase a California solar plant by Berkshire-Hathaway (BRK.A) in early December set solar watchers a titter. The plant in question was a photovoltaic (PV) cell plant in California called the Topaz plant. Its attractiveness to Buffett came from the 25-year contract the plant’s maker, First Solar (FSLR) had signed with Pacific Gas and Electric (PCG). California has a state law requiring that the state produce a third of its electricity from renewable sources by 2020, and the contract was signed prior to the influx of cheap panels from China, making it extremely lucrative.
First Solar also made news when it announced a major shift into the utility segment. Previously focusing on tax incentives and the retail market, the company announced in its most recent earnings report that long-term plans included a bigger focus on manufacturing panels for solar plants.
Atlas Energy (ATLS), which changed its name from Atlas Pipeline Holdings in February, has had a banner year in 2011. The holding company, acting through its subsidiaries, works in natural gas gathering, processing and treating services in the Mid-Continent and Appalachia regions. This last year has been a solid one for Atlas, which doubled its dividend on August 8, as the company’s shares have increased by over 60 percent.
Ormat Technologies, Inc. (ORA) is a vertically integrated company engaged in geothermal and recovered energy power business. Ormat builds and operates geothermal and recovered energy power plants in the United States while also designing and manufacturing equipment for the operations of those plants. Ormat, though, has suffered through a tough 2011, showing a steady decline since January and losing over 40 percent of its share value on the year.