Sunrun for Vivint, a hot July, Buffett's buy, and EIA outlooks

Mike Zaccardi, CFA, CMT

It’s been a busy week in the utility space to kick off the second half.

1) July 2020 could be the hottest month in EIA history (since 1950) with more than 400 cooling degree days.

2) Warren Buffett’s Berkshire Hathaway announced the holding company behemoth is buying natural gas pipeline and storage assets from Dominion Energy as Dominion and Duke scrap plans for the infamous Atlantic Coast Pipelines – and now another headline.

I’ll give you a moment to catch your breath.

3) Sunrun is buying Vivint Solar in a monster (for the solar industry) deal worth $3.2 billion including debt.

News of the deal sparked a buying frenzy among solar stocks early this week. The Invesco Solar ETF (TAN) rallied sharply from near $38 to above $40 for a time on Tuesday. The ETF has been in rally-mode since breaking above the $36-$37 area earlier this month. The play was highlighted in our Technicals Sunday post last month.

Uncertainty remains, however, as the general election is just 4 short months away. It should not be a game-changer election though. Joe Biden is seen as a somewhat moderate democrat and we all know where President Trump stands. It would be a different situation, with much more uncertainty, if say Bernie Sanders or Elizabeth Warren were the Democratic nominee – both to the left of Joe.

Also in the news this week was Tuesday’s EIA Short-Term Energy Outlook which calls for lower natural gas consumption looking ahead 18 months with moderating weather and growth in renewables. Coal generation is expected to continue its descent.

2019 and 2021 together could be the first back to back years of declining power demand in nearly a decade as COVID-19 takes its toll on the industry. Good new for consumers though – energy expenditures as a percent of GDP is at multi-decade lows.

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Chart used with permission from