This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

European Utilities Look Toward Renewable Energy

I have documented in successive posts my take on the shakeout happening in European utilities. The squeeze of higher gas prices, the absolute dependence of the European continent on outside sources of fuel (at least carbon-based), the increasingly dominant position of nuclear power in France and the looming Russian energy bear right outside of Europe's doors all make for a volatile and explosive cocktail.

In the coming few months, the European utilities that are going to come out ahead are either already jockeying for position in Russia or investing heavily in alternative, renewable energy sources. In particular, the Spanish and (to some extent) Italian utilities that I discuss below are already capitalizing heavily on the resources that seem plentiful in Southern Europe -- sun and wind.

Electricite de France

Electricite de France is the second-largest utility in the world. With a market cap of $184.8 billion, the company has posted a steady and vigorous stock appreciation since its initial IPO on November 2005. Its two-year and one-year stock returns came to 88.7% and 66%, respectively.

Electricite de France's power generation is almost exclusively based on nuclear power (71.2%), with hydro power constituting 7.8% of its power generation base and fossil fuel thermal, 5.3% derives from fossil fuel thermal and the remaining 15.7% from renewable energies excluding hydro.

Sixty-nine percent of its revenue is generated by the production and sale of electricity and natural gas. Its net earnings growth last quarter came to 71%, with the following breakdown: Revenue originating from generation and supply of electricity (70% of revenue) increased by 20%, while distribution revenue (16% of revenue) declined by 7%, and transmission revenue (7% of revenue) declined by 3.5%. Finally, the last segment, consisting of energy services (7% of revenue), including thermal and renewable energy services, posted a 57% increase in revenue. An unusually warm winter in Western Europe did a number on Electricite de France's revenue, as well as other European utilities.

The problem with Electricite de France is that, in an increasingly eco-conscious Europe and in the face of increasingly severe European Union directives, the utility is unable to manage its carbon dioxide emissions, which increased by 255.6% last quarter. Nevertheless, due to France's dominant nuclear position along with the support of the population, I foresee bright days ahead for this stock, with continued strong price appreciation like in the past.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ACXIF $77.55 0.00%
CPYYY $13.84 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs