Get Your Feet Wet With Utility Funds

United Nations Secretary General Ban Ki-moon released a report Thursday calling for worldwide investment in renewable energy totaling $20 trillion over the next quarter century. Details of the report will be debated when the General Assembly meets Feb. 11 and 12 to discuss climate change.

The 52-page report refers to the building of green electric energy generation capacity as "the heart of the climate mitigation effort." A new agreement among the 192 member nations is needed to prepare for the expiration of the Kyoto Protocol in 2012.

Leading the charge toward zero-emission electricity, the California Public Utilities Commission approved for construction a five-megawatt photovoltaic solar power plant to be built by Cleantech America Inc in Mendota, Calif. This facility is scheduled to begin providing emission-free renewable energy, during peak hours of electric demand, in the spring of 2009.

In a week when interest rates were lowered again by the Federal Reserve, investors sought the protection of dividend-paying utility stocks. As the U.S. dollar continues to slide, utilities denominated in foreign currencies looked especially attractive.

The best performing fund this week is the (MFD)Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund (MFD), a closed-end fund jumping 18.98% in the five trading days ended Thursday, Jan. 31. The fund's net asset value climbed just 2.99% sending the premium above NAV to 24.36% from 7.65% a week earlier.

The Macquarie holding of the Auckland International Airport took off by 7.84% as Her Majesty Queen Elizabeth II through her Minister of Finance accumulated shares for the New Zealand Superannuation Fund.

Other winning positions include 6.73% in Pennon Group, a British water utility, 5.35% in Consumers' Waterheater Income Fund, that leases 1.4 million water heaters to Ontario, Canada, residents, and 5.02% in Snam Rete Gas, an Italian gas distributor.

In second place, the (PIO)PowerShares Global Water Portfolio (PIO) spurted 6.09% this week. The fund's position in Tetra Tech (TTEK) bubbled 13.49% higher as this U.S. environmental engineering company beat first quarter fiscal 2008 estimates by a penny. Also, Arcadis chugged ahead by 12.16% on news that the company won a contract to supervise the modernization of a Polish railroad.

In third place, the (DBU)WisdomTree International Utilities Sector Fund (DBU) grew 5.44% as its holdings in Spanish electric utilities Iberdrola (IBDRY), up 11.99%, and Union Fenosa, up 8.5%, became takeover targets. The chief executive of Hera, a holding rising 12.04%, explained that "consolidation in Italian utilities" via mergers and acquisitions would be prevalent in 2008.

The worst-performing utility fund this week is the (SDP)UltraShort Utilities ProShares (SDP) losing 3.47% for the period. This fund tracks the Dow Jones U.S. Utilities Index with 200% negative leverage. The index members having the best week include Equitable Resources (EQT), up 11.12%, El Paso Electric(EE), up 9.93%, Allete(ALE), up 7.36%, and Dynegy(DYN), up 7.19%.

The gain by Equitable Resources was on a 26% increase in its estimation of proved, potential, probable and possible natural gas reserves discovered by its bountiful horizontal drilling program.

Also short-circuiting this week is the (ERH)Evergreen Utilities and High Income Fund (ERH), off by 2.80%. Two holdings, Fortum Oyj and E.ON, slid on fears that their dividends may not be sustainable in the coming year. The two companies are working together to enlarge a Swedish nuclear power plant at a cost of $630 million, but were forced to delay the upgrade to October from August.

Best-Performing Utility Funds Ranked by returns for the week ended Jan. 31
Fund	Ticker	Rating	Fund Type	1-Week Total Return
Macquarie/FT Global Infrastructure/Utilities Div & Inc	MFD	B	Closed-End	18.98%
PowerShares Global Water Portfolio	PIO	U	ETF	6.09%
WisdomTree International Utilities Sector Fund	DBU	A+	ETF	5.44%
iShares S&P Global Infrastructure Index Fund	IGF	U	ETF	5.00%
PowerShares Water Resources Portfolio	PHO	B-	ETF	4.58%
The Socially Responsible Utilities Fund	FLRUX	A+	Open-End	4.06%
Fidelity Utilities Fund	FIUIX	A	Open-End	3.94%
Gabelli Global Utility & Income Trust	GLU	B	Closed-End	3.46%
Rydex S&P Equal Weight Utilities ETF	RYU	B	ETF	3.32%
First Trust ISE Water Index Fund	FIW	U	ETF	3.31%
Source: Bloomberg. Read this for an explanation of our ratings. http://www.thestreet.com/tsc/ratings/wrm_funds_rec.html

Worst-Performing Utility Funds Ranked by returns for the week ended Jan. 31
Fund	Ticker	Rating	Fund Type	1-Week Total Return
UltraShort Utilities ProShares	SDP	U	ETF	-3.47%
Evergreen Utilities and High Income Fund	ERH	B	Closed-End	-2.80%
PowerShares FTSE RAFI Utilities Sector Portfolio	PRFU	A+	ETF	0.41%
Duff & Phelps Utility and Corporate Bond Trust Inc	DUC	E+	Closed-End	1.18%
Utilities Select Sector SPDR Fund	XLU	A+	ETF	1.61%
DTF Tax-Free Income Inc	DTF	C-	Closed-End	1.62%
Utilities HOLDRs Trust	UTH	A-	ETF	1.67%
Eaton Vance Dividend Builder Fund	EMTMX	B-	Open-End	1.80%
Franklin Utilities Fund	FKUTX	A+	Open-End	1.85%
Gabelli Utilities Fund	GAUAX	A+	Open-End	1.91%
Source: Bloomberg. Read this for an explanation of our ratings. http://www.thestreet.com/tsc/ratings/wrm_funds_rec.html

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