Today we have seen a diverging set of calls in the utility sector.  Bank of America Merrill Lynch has issued a somewhat cautious outlook, while Credit Suisse has talked up the risk-adjusted returns.  This is on the heels of a deep value and growth screen we ran on Exelon Corporation (NYSE: EXC); Entergy Corporation (NYSE: ETR); American Electric Power Co., Inc. (NYSE: AEP); and Public Service Enterprise Group Inc. (NYSE: PEG) as those utilities averaged dividend yields of close to 5%, were all large-cap, were down for the year so far, had operating margins of 15% or more, and a return on equity of at least 10%.

Credit Suisse’s outlook noted that there are still plenty of risk adjusted returns with the regulated utility group offering annual rates of return of 7% to 11%.  The breakdown is roughly 3% to 7% in earnings per share plus the $% to 5% in the dividend yields.  And on the risk side of the equation, CRedit Suisse sees a beta range of only 0.6 to 0.7 for the group.  The firm noted that this is a very compelling return in a low interest rate environment and fundamentally against the S&P 500 Index that would “require a minimum growth rate of 7% plus the 2.1% dividend yield to match the Utility stocks.”

Bank of America gave an earnings preview for the first quarter for utilities and brought up no winter, low earnings, and updating gas curves.  The mild weather is expected to drag down first quarter utility earnings by 6%.  The low natural gas price adjustments have been ratcheted down significantly from 2012 to 2014.   NV Energy, Inc. (NYSE: NVE) is noted as being expected to have a large dividend hike.

BofA also noted that Calpine Corporation (NYSE: CPN) has risen sharply and NRG Energy, Inc. (NYSE: NRG) and GenOn Energy, Inc. (NYSE: GEN) have both dropped sharply on the coal/gas switching theme, but the firm’s take is that the stocks may be extended too far on both sides as it does not see much change in guidance from any of the three companies.

It is always interesting when you see different calls when the same data is available.  It is a part of what makes a horserace.

JON C. OGG

24/7 Wall St. has formed a screening on the sector to see which high-yielding utilities may have finally priced in the worst of the news. We ran a screen on Finviz.com looking for the best of the best utilities. In our screen, we chose the following criteria:

• Market cap of $5 billion or more
• Daily trading volume of at least 1 million shares
• Dividend yield of 4%
• Year-to-date stock performance was negative
• Return on equity was at least 10%
• Operating margin of 15% or more
• Debt-to-equity under 1.4-times

The Utilities Select Sector SPDR (NYSE: XLU) managed to close up 0.6% at $34.87. Our screen turned up only four of the following utility leaders, with the key criteria being by dividend yield (highest to lowest): Exelon Corporation (NYSE: EXC); Entergy Corporation (NYSE: ETR); American Electric Power Co., Inc. (NYSE: AEP); and Public Service Enterprise Group Inc. (NYSE: PEG).

With the fear of rising interest rates ahead and higher dividend taxes, investors have tended to shy away from the steady earnings, yields and returns of utilities. The two questions that might matter the most are: 1) What if rates do not rise as much as investors hope? And 2) What if dividend taxes are not going to rise to over 40% for the high-income earners? Another question to ask is: What if the regulatory climate lightens up a tad against the utility sector? If one or two of these possibilities start to become reality, then there may be a huge opportunity in this sector. Even if these issues remain, it may be that most of the bad news is getting close to being factored in.

Exelon Corporation (NYSE: EXC) is the leader of the pack due to its 5.55% dividend yield. It has a market cap of $25 billion and trades more than 7 million shares per day. Year-to date its shares have fallen by 11.6%. The utility’s return on equity was listed as 17.9%, its operating margin is 23.6% and its debt-to-equity ratio was less than 1 at 0.94. Exelon closed up 0.6% at $38.06 against a 52-week range of $37.48 to $45.45.

Entergy Corporation (NYSE: ETR) has a market cap of $11.7 billion and trades 1.2 million shares per day. It has a dividend yield of 5% and year-to date its shares have fallen by 8.4%. The utility’s return on equity was listed as 15.4%, its operating margin is 17.9% and its debt-to-equity ratio was 1.34. Entergy recently closed up 0.5% at $66.43 against a 52-week range of $57.60 to $74.00.

American Electric Power Co., Inc. (NYSE: AEP) has a market cap of $18 billion and trades 4.9 milllion shares per day. It has a dividend yield of 5% and year to date its shares have fallen by 7.5%. The utility’s return on equity was listed as 11.1%, its operating margin is 18.4% and its debt-to-equity ratio was 1.24. Shares closed up 0.5% at $37.97 and the 52-week range is $33.09 to $41.98.

Public Service Enterprise Group Inc. (NYSE: PEG) has a market cap of $15 billion and trades 3.6 milllion shares per day. It has a dividend yield 4.9%. Year to date, its shares have fallen by 8%. The utility’s return on equity was listed as 14.1%, its operating margin is 24.4% and its debt-to-equity ratio was the lowest of the group at only 0.80. Public Service Enterprise closed up 1% at $30.33 against a 52-week range of $27.97 to $35.48.

What is interesting about this group is that AEP is the only member of the four that is not down more than 10% from its 52-week high, and all of these are closer to their 52-week lows than their highs.

JON C. OGG

The merger would create the country’s largest wholesaler of market-priced electric power, and that’s the rub, according to The Wall Street Journal.  The combined companies will have the capacity to generate some 35,000 megawatts of electricity and Maryland officials, including the state’s governor, are worried that the combined companies would have sufficient market power to drive wholesale electricity higher.

A study conducted for the state indicates that the merger could increase wholesale electricity costs up by 12%-37% for parts of the market that the new company serves. According to an Exelon official, the study assumes that the combined company would sell large amounts of electricity into the market managed by PJM Interconnection LLC, when, in fact, the company sells a large part of its capacity directly through utilities and other resellers and would have little impact on the daily auctions the PJM conducts.

Utility stocks have been getting more interest as the US and global economies have gotten weaker. We have suggested that utilities are replacing certificates of deposit and bonds as preferred retirement investments.

Exelon’s annual dividend is $2.10 and its dividend yield is 5.20%. Constellation pays a $0.96 annual dividend and its dividend yield is 2.60%. At Entergy Corp. (NYSE: ETR), the dividend yield is also 5.20%, and American Electric Power Co. (NYSE: AEP) pays a yield of 5%.

In contrast 5- and 7-year US Treasuries currently pay a negative yield and 10-year Treasuries pay just 0.7%. An average CD pays less than 1.5%. For income investors, utilities are safe, high-dividend investments.

Whether a combined Exelon-Constellation would yield to investors than the two companies separately is certainly arguable, but assuming that Exelon’s yield doesn’t fall, Constellation shareholders have got to love the proposed merger. Now it’s up to Exelon to make state regulators at least like the deal.

Paul Ausick

Other noteworthy companies with ratings news include PPL Corp. (NYSE: PPL), Domino’s Pizza, Inc. (NYSE: DPZ), Cemex, S.A.B. de C.V. (NYSE: CX), Entergy Corp. (NYSE: ETR), FedEx Corp. (NYSE: FDX), European Aeronautic Defence and Space N. V. (OTC: EADSY), and BHP Billiton plc (NYSE: BHP).

PPL Corp. (NYSE: PPL) received affirmation of its ‘Baa2′ rating from Moody’s on senior unsecured debt at its PPL Energy Supply subsidiary. At the same time, the agency affirmed its ‘Baa3′ rating on PPL’s issuer rating with a stable outlook. PPL is a classic defensive utility stock, with a forward dividend yield of 4.8%.

Domino’s Pizza, Inc. (NYSE: DPZ) postponed the issuance of $1.625 billion in senior unsecured notes leading S&P to withdraw its preliminary ‘BBB+’ rating on the notes. Domino’s stock price has more than doubled in the past 12 months.

Cemex, S.A.B. de C.V. (NYSE: CX) had its global scale ‘B’ rating and ‘mxBB+/mxB’ national scale corporate credit ratings placed on  CreditWatch with negative implications at S&P. One of the world’s largest cement makers, Mexico-based Cemex faces a slowdown in activity related to the weaker global economy. S&P also noted that it anticipates that Cemex “might need to renegotiate the credit conditions in its financing agreement with lenders, to avoid a covenant breach by year-end.” Cemex shares are trading up in the early afternoon today, at $3.43, in a 52-week range of $3.33-$11.15. The shares posted a new 52-week low yesterday.

Petroplus Holdings AG (OTC: PEPFF), a Swiss-based pure-play oil refiner, received a downgrade to its long-term credit rating from ‘B+’ to ‘B’ at S&P. This is interesting because Petroplus has been struggling for some time, and S&P especially notes weak refining margins in Europe and poor operating performance at Petroplus. US refiner Valero Energy Corp. (NYSE: VLO) recently purchased a refinery in the UK and one or more of Petroplus’s six European refineries may be available at an attractive price.

Entergy Corp.’s (NYSE: ETR) Entergy Louisiana LLC (NYSE: ELB) subsidiary received a ‘AAA’ rating on $207 million senior secured investment recovery bonds from S&P. The bonds are essentially risk-free because the company has an irrevocable right to recover its investment by raising rates. That’s why utility stocks are popular defensive plays.

FedEx Corp. (NYSE: FDX) and its Federal Express Corp. subsidiary received re-affirmation of issuer default ratings of ‘BBB’ from Fitch Ratings. FedEx’s senior unsecured credit facility and its senior unsecured debt were also affirmed at ‘BBB’. Fitch noted that the unsecured debt totaled $1.7 billion and the unsecured credit facility totals $1 billion. The agency’s outlook on FedEx is stable.

European Aeronautic Defence and Space N. V. (OTC: EADSY), makers of the Airbus, has had its long-term issuer default rating and its senior unsecured debt rating affirmed at ‘BBB+’ with a stable outlook by Fitch. EADS’s record backlog of 4,200 orders indicates strong revenue growth and the company’s solid cash position contributed to the rating.

BHP Billiton plc (NYSE: BHP) subsidiary Petrohawk Energy Corp. received an ‘A’ rating on its outstanding senior unsecured debt from Fitch. BHP itself had its long-term issuer default rating and senior unsecured ratings affirmed at ‘A+’. Fitch attributes the one-notch difference to the limited operational integration between mining company BHP and its newly purchased Petrohawk oil & gas business, as well as change-of-control language for the 2014-15 bonds that sets the re-purchase premium so low that few takers are expected.

Paul Ausick

UBS has issued a brief report that hurricanes tend to have little impact on GDP and on Federal Reserve policy, but one notion that they do influence is employment.  The observation is that companies in hurricane areas tend to push out their new hiring decisions by about a month.

We wanted to take a look at just some of the companies in each sector that would win and lose from the aftermath of Hurricane Irene.  You can imagine that insurance companies are going to be hit by damage claims, but what about power, water, and telecom?  And imagine the construction and rebuilding business.  And the building supplies and service providers.

Allstate Corporation (NYSE: ALL) and The Travelers Companies, Inc. (NYSE: TRV) have exposure in the areas around North Carolina.  That is where the landfall is expected first.  Perhaps more worrisome is the upper Eastern Seaboard where Hurricane Irene is expected to strafe this weekend. The Chubb Corporation (NYSE: CB) has exposure in New York and on north throughout southern New England, as does Allstate and Travelers.  Chubb noted on its site, “Hurricane Irene Alert: Chubb is helping its customers prepare for the storm.”  Allstate also has a claim and preparedness site.

Berkshire Hathaway Inc. (NYSE: BRK-A) is also likely not immune as Mr. Buffett has joked in the past that he was lucky enough to avoid hurricanes for two straight years.

Duke Energy Corporation (NYSE: DUK) spoke on CNBC this morning saying that while they do expect damage that they have their staff ready to go to assist in the region.  Power lines and power equipments tend to not do well in floods, 100 mile an hour wind, lightning, and with flying debris.  Dominion Resources Inc. (NYSE: D) saw a brief outage at a nuclear plant this week due to the earthquake, but it has already said that its Virginia and North Caroline units are preparing for the aftermath.  Entergy Corporation (NYSE: ETR) has the often controversial Indian Point nuclear power plant located about 35 miles the middle of Manhattan.

This could have an impact on American Water Works Company, Inc. (NYSE: AWK) as well, even though this company is very diversified throughout parts of America.  The New Jersey based water utility has operations at risk in North Carolina, Virginia, Maryland, Pennsylvania, New York, New Jersey, Connecticut, Rhode Island, and Massachusetts.

Verizon Communications Inc. (NYSE: VZ) is also diversified all over the United States, particularly on wireless.   That being said, it has real land line and phone line exposure throughout much of the projected areas in New York and the Northeast as the former Bell Atlantic.

Icahn Enterprise was thumped after it made a bid for Clorox, which was rejected. Boeing was hit because large customer American may buy jets from rival Airbus.

Microsoft sold off, probably because of news that smartphone partner is in more trouble

The Flame Index started as a research tool in 2008 at the NY Innovation Design Lab (nyidlab). It was used as a general metric to evaluate companies and their risk in the media. Publicly traded Fortune 500 companies are used as a measure to calculate an overall market of negative news and the companies are ranked within that market

Data and ranking provided by the Flame Index.

Some of the more recent dividend hikes in the utility sector have been in shares of Duke Energy Corporation (NYSE: DUK), American Water Works Company, Inc. (NYSE: AWK), American States Water Company (NYSE: AWR), Xcel Energy Inc. (NYSE: XEL), and DTE Energy Co. (NYSE: DTE).  What we are trying to show you is that the trend of dividend hikes is not without precedent in utilities.

24/7 Wall St. is looking for utility dividend hike candidates after some recent hikes in the sector.  We have evaluated 9 large-cap or mid-cap dividend producing utility stocks for investors where you can expect a dividend hike in the coming months.  These include, in alphabetic order: American Electric Power Co., Inc. (NYSE: AEP), Constellation Energy Group, Inc. (NYSE: CEG), Dominion Resources, Inc. (NYSE: D), Entergy Corporation (NYSE: ETR), FirstEnergy Corp. (NYSE: FE), NextEra Energy, Inc. (NYSE: NEE), Pinnacle West Capital Corporation (NYSE: PNW), PPL Corporation (NYSE: PPL), and Progress Energy Inc. (NYSE: PGN).

Now that the Supreme Court has rejected some carbon-cutting measures, some additional drag has been removed from this sector that might have otherwise been victim to higher ten-year Treasury yields.  We would also like to note that we have tried to consider mergers in our analysis as this sector continues to consolidate.  Our basis is more of a standalone merger basis rather than solely due to mergers  into consideration here because we are looking for the companies which can grow their dividends based solely upon their own metrics.

American Electric Power Co., Inc. (NYSE: AEP) is perhaps our favorite utility and it was named as one of our ten stocks to own for the next decade.  Its shares recently traded at $38.18 and has a current dividend yield of 4.9%.  Its 52-week trading range is $30.34 to $38.99.  Thomson Reuters has estimates of $3.13 EPS for 2011 and $3.22 EPS for 2012.  AEP has had three straight quarters of a $0.46 dividend and this is likely to be grown in the months ahead.  The prior $0.42 quarterly dividend was only in place for two quarters before being raised.  The current pace comes to $1.84 per year.  Our take, look for $0.48 per quarter.  We are not looking for an equal hike this time around as earnings growth is only expected to be almost 3% next year.

Constellation Energy Group, Inc. (NYSE: CEG) is often treated as a controversial stock in the world of utilities.  While we said we are not taking M&A into consideration, it is in a pending deal with Excelon and we are still evaluating this on a standalone basis.  It recently traded at $37.70 and has a current dividend yield of 2.55%.  Its 52-week trading range is $27.24 to $37.87.  Thomson Reuters has estimates of $3.20 EPS for 2011 and $2.46 EPS for 2012.  Its dividend used to be far higher and has been $0.24 per quarter for about ten quarters in a row.  It is hard to know about the “when” but the “if” seems a shoe-in if it somehow is not merged.

Dominion Resources, Inc. (NYSE: D) recently traded at $48.61 and has a current dividend yield of almost 4.1%.  Its 52-week trading range is $36.98 to $49.07.  Thomson Reuters has estimates of $3.14 EPS for 2011 and $3.25 EPS for 2012.  The company has been in the habit of hiking payouts more than once a year if the last hike was a sign.  If no dividend hike is made in the fall, it could be announced late this year.  The current payout is $1.97 per year, leaving well more than $1.00 per share for operations ahead.

American Electric Power Co., Inc. (NYSE: AEP) has outlined the charges, the impact on jobs and prices, and more for the new EPA rules being proposed.  It is asking for relief, and what the company is giving for projections may only add pressure on the entire sector of utilities.  The ETFs include Utilities Select Sector SPDR (NYSE: XLU), iShares Dow Jones US Utilities (NYSE: IDU), Rydex S&P Equal Weight Utilities (NYSE: RYU).  Those three ETFs are all down 3% to 4% from their very recent highs.  The ProShares Ultra Utilities (NYSE: UPW) uses leverage, so it is down more from highs than peers with a drop of more than 5.5%; it is also up almost 50% from its year lows.

Entergy Corporation (NYSE: ETR) has been the dog of the utility and power generation sector.  At $67.60, its shares are down more than 16% from the peak and are only up about 4.5% from its 52-week low.  Thomson Reuters has a consensus price target of only $73.96.

American Electric Power Co., Inc. (NYSE: AEP) is down about 4% from its recent highs, but many peers are now down over 5% from highs and some of the weaker utilities are approaching the double-digit drop level now.  AEP outlined the billions of dollars that the plan will cost ahead.  Before wondering just how much they tacked on for a total cost, the skeptics need to look at a fresh report that recently came out from the Electric Power Research Institute just for a smart grid being some $500 billion. This will be a boom for companies like Itron, Inc. (NASDAQ: ITRI) for its smart meters, but the valuation has been high there and its shares have been challenging 52-week lows of late.

American Electric Power’s figures, pleads, and complaints comes to rather long list that we chopped down so you wouldn’t have to read a tome.  The notations about the new proposed EPA rules are as follows:

• AEP’s compliance plan would retire nearly 6,000 megawatts of coal-fired power generation;
• upgrade or install new advanced emissions reduction equipment on another 10,100 MW;
• refuel 1,070 MW of coal generation as 932 MW of natural gas capacity;
• build 1,220 MW of natural gas-fueled generation.
• The cost of the AEP compliance plan could range from $6 billion to $8 billion in capital investment through 2020.
• High demand for labor and materials due to a constrained compliance time frame could drive actual costs higher.
• Retirement and retrofit costs in the plan are in addition to more than $7.2 billion that AEP has invested since 1990 to cut emissions from its coal plants.
• AEP claims that annual emissions of nitrogen oxides from its plants are down 80% from 1990.
• AEP currently owns nearly 25,000 MW of coal-fueled generation, about 65% of its total generating capacity. Coal would still fuel about 57% of AEP’s total generating capacity by the end of the decade.
• “…the cumulative impacts of the EPA’s current regulatory path have been vastly underestimated, particularly in Midwest states dependent on coal to fuel their economies.”
• “…because of the unrealistic compliance timelines in the EPA proposals, we will have to prematurely shut down nearly 25 percent of our current coal-fueled generating capacity, cut hundreds of good power plant jobs, and invest billions of dollars in capital to retire, retrofit and replace coal-fueled power plants.”
• AEP says the sudden increase in electricity rates and impacts on state economies will be significant.
• While some jobs would be created, AEP expects a net loss of approximately 600 power plant jobs with annual wages totaling approximately $40 million under the proposed EPA rules.
• Businesses will face the impact of electricity price increases by 10% to over 35% just for compliance with these environmental rules.
• The proposed timelines for compliance aren’t adequate for construction of significant retrofits or replacement generation.
• AEP’s compliance plan alone would abruptly cut generation capacity in the Midwest by more than 5,400 MW. AEP plans to keep speaking with lawmakers (i.e. lobbying) in Washington about a legislative approach that would achieve the same long-term goals with lower economic and jobs toll.
• Plants to be permanently retired are as follows:

1. Glen Lyn Plant, Glen Lyn, Va. – 335 MW (retired by Dec. 31, 2014);
2. Kammer Plant, Moundsville, W.Va. – 630 MW (retired by Dec. 31, 2014);
3. Kanawha River Plant, Glasgow, W.Va. – 400 MW (retired by Dec. 31, 2014);
4. Phillip Sporn Plant, New Haven, W.Va. – 1,050 MW (450 MW expected to retire in 2011, 600 MW retired by Dec. 31, 2014); and
5. Picway Plant, Lockbourne, Ohio – 100 MW (retired by Dec. 31, 2014).

• AEP would retire generating units at the following locations but continue operating some generation at the sites:

1. Big Sandy Plant, Louisa, Ky. – Units 1 and 2 (1,078 MW) retired by Dec. 31, 2014;
2. Big Sandy Unit 1 would be rebuilt as a 640-MW natural gas plant by Dec. 31, 2015;
3. Clinch River Plant, Cleveland, Va. – Unit 3 (235 MW) retired by Dec. 31, 2014; Units 1 and 2 (470 MW total) would be refueled with natural gas with a capacity of 422 MW by Dec. 31, 2014;
4. Conesville Plant, Conesville, Ohio – Unit 3 (165 MW) retired by Dec. 31, 2012; Units 5 and 6 (800 MW total) would continue operating with retrofits;
5. Muskingum River Plant, Beverly, Ohio – Units 1-4 (840 MW) retired by Dec. 31, 2014; Muskingum River Unit 5 (600 MW) may be refueled with natural gas with a capacity of 510 MW by Dec. 31, 2014, depending on regulatory treatment in Ohio;
6. Tanners Creek Plant, Lawrenceburg, Ind. – Units 1, 2 and 3 (495 MW) retired by Dec. 31, 2014; Unit 4 (500 MW) would continue to operate with retrofits; and
7. Welsh Plant, Pittsburg, Texas – Unit 2 (528 MW) retired by Dec. 31, 2014; Units 1 and 3 (1,056 MW) would continue to operate with retrofits.

• AEP also said that it will complete construction of the Dresden Plant (580 MW natural gas) in Dresden, Ohio, in 2012 and, in addition to retrofits already noted, it would install or upgrade emissions reduction equipment at seven other coal-fueled power plants in Arkansas, Indiana, Louisiana, Ohio and Texas.

So, as you probably deduced… this matters.  Environmentalists and capitalists will argue over AEP’s claims and figures.  It doesn’t really matter.  This is now the new risk profile and is likely a new starting point.  Our take is that AEP is still one of our top stocks to own for the next decade.  We always maintained that these shares should be bought on a pullback rather than chased.  AEP shares are only about 3.8% off the 52-week highs.  If more weakness comes in on the shares, that is when long-term opportunists should really consider positions.  Analysts from Thomson Reuters show a consensus price target of $39.69 and the stock trades now at just under 12-times a blended forward earnings estimate.

With consolidation opportunities ahead in the world of adjacent utilities, we have scribbled out that the long-term opportunity for AEP could theoretically reach $5.00 in earnings per share over the next decade. Our own multiple is a fair 10-times earnings and that generates a raw price target of about $50.00 at some point, discounted two or three years out.  That gives a five-year to seven-year parameter, but remember that AEP pays almost a 5% dividend yield as well and it has a history of dividend hikes.

Today’s news is something we are merely looking at as a starting point rather than as gospel.  The risks are many, but the reality is that electric power demand is likely to only rise over the next decade.  AEP can navigate this storm, but the real impact that investors need to consider is more of a sector risk rather than just one company’s projection of $6 to $8 billion spent over the coming decade.

JON C. OGG

AEGON (NYSE: AEG) Raised to Buy at BofA/ML.
AFLAC Inc. (NYSE: AFL) Cut to Equal Weight at Morgan Stanley.
The Andersons, Inc. (NASDAQ: ANDE) Reiterated Buy as Value at Zacks.
Blue Coat Systems, Inc. (NASDAQ: BCSI) Reiterated Underperform and cut target to $20 at BofA/ML.
Broadcom Corporation (NASDAQ: BRCM) Raised to Top Pick at FBR Capital Markets.
Computer Sciences Corp. (NYSE: CSC) Reiterated Underperform as Bear of the Day at Zacks.
Dendreon Corporation (NASDAQ: DNDN) Maintained Underperform with $29 target at Credit Suisse.
Entergy Corporation (NYSE: ETR) Raised to Outperform at Wells Fargo.
Itron, Inc. (NASDAQ: ITRI) Cut to Underperform at Baird.
Red Robin Gourmet Burgers (NASDAQ: RRGB) Raised to Outperform as Bull of the Day at Zacks.
UIL Holdings Corp. (NYSE: UIL) Cut to Hold at Argus.
Weyerhaeuser Co. (NYSE: WY) Cut to Sell at Deutsche Bank.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

The fate of the Vermont Yankee nuclear power plant owned by Entergy Corp. (NYSE: ETR) remains undecided, but not inactive. The company has filed suit in federal court to prevent the state of Vermont from shutting down the plant when its original license expires on March 12, 2012. The US Nuclear Regulatory Commission granted the plant a 20-year extension to its operating license, but the state has refused to extend its operating permit.

Entergy wants a temporary injunction preventing the state from slowing or stopping operation of Vermont Yankee while the suit is being considered, and it also wants a ruling that would prohibit the state from closing the plant. Entergy agreed to comply with state review requirements when it bought the plant in 2002, but now claims that the state changed the rules in 2006 by requiring the state legislature to approve an extension before the state public utilities commission could grant an operating permit.

Entergy tried to sell the plant, but found no takers. This story has a ways to run yet, and the central issue — do the states or the feds control nuclear power licensing — may not be decided for years.

From a nuke trying to remain in operation to a new nuclear project that has apparently been killed. NRG Energy, Inc. (NYSE: NRG) has announced that it will write down approximately $481 million in connection with its development of two new nuclear generation plants at its South Texas Project. The write-down will be taken as a pre-tax charge in the company’s first quarter earnings.

NRG is blaming the nuclear disaster in Japan for the move, saying that the Japanese incident has injected “multiple uncertainties around new nuclear development” in the US. NRG and its partner, Toshiba, will continue to seek licenses, loan guarantees, and customers for the new nukes. The bad news is that the suspension of engineering work will cause the company to reduce its workforce. NRG did not specify how many employees would be let go, but did say that it expects one-time charges of more than $20 million in its second quarter.

The 420-megawatt Cape Wind project in Nantucket Sound has received construction approval from the US Bureau of Ocean Energy Management, Regulation, and Enforcement. The project comprises 130 turbines to be installed about five miles from the coast. No construction starting date has been announced, and there are sure to be further legal challenges before construction begins.

Finally today, the Boeing Co. (NYSE: BA) will install 2.6 megawatts of solar PV panels on the roof of its new 787 assembly plant in South Carolina. The plant will be a 100% renewable energy site once the solar panel installation is complete. It will be the sixth largest solar PV installation in the US, and will use thin-film solar laminate panels. Boeing did not say which company would supply the panels, but “thin-film” usually means First Solar Inc. (NASDAQ: FSLR).

Paul Ausick