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M&A outlook for US generation is strong; Shell wraps up $30B in asset sales

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


M&A outlook for US generation is strong; Shell wraps up $30B in asset sales

Top News

Foreign buyers, maturing renewables augur strong M&A outlook for US generation

Bankers and lawyers in the power finance sector predict the busy U.S. seller's market for generation assets will extend into 2019, with Canadian pension funds and European corporations poised to make further purchases.

Yearslong court fight between Cheniere, Tellurian stretches into 2019

A long-running legal dispute over proposed multibillion-dollar LNG projects between LNG exporter Cheniere Energy Inc. and rival startup Tellurian Inc. will continue into 2019 after a ruling from a Texas appellate court.

Shell wraps up 2-year $30B asset divestment plan to end 2018

Royal Dutch Shell PLC is well on its way to transforming its fleet to focus on more prolific production areas, as the Anglo-Dutch oil major finalizes its two-year plan started in 2016 to divest $30 billion in noncore assets through 2018.

Experts: Reclamation liabilities, low value lessened price of Westmoreland mines

Analysts said they were not surprised by Westmoreland Coal Co.'s plan to sell one Ohio mine and pay a holding company to take several others because the operations have high reclamation costs and shrinking profitability.

Quoted

"Physical climate risks have been identified by financial regulators and insurance companies as a major financial risk to portfolios." According to a new report, carried out for the California Department of Insurance, that found that portions of the energy portfolio investments of insurers in California are exposed to climate-related physical risks associated with flooding, water scarcity and wildfires.

Power

* PG&E Corp. is considering seeking bankruptcy protection amid mounting insurance claims resulting from fatal wildfires in the past two years, Reuters reported, citing people familiar with the matter.

* Tesla Inc. started construction of its first foreign Gigafactory in Shanghai that is estimated to cost about $2 billion, Reuters reported. The factory is expected to start production of Model 3 electric vehicles by the end of 2019.

* With its recent proposal to rescind the legal basis for the Obama-era Mercury and Air Toxics Standards, or MATS, the U.S. Environmental Protection Agency has staked out a nuanced position that some believe eventually could give private coal interests cover to challenge the regulation itself.

* A federal judge has denied real estate developer Franklin Haney Sr.'s request for an expedited hearing on a lawsuit that challenges the Tennessee Valley Authority's decision to cancel the sale of the unfinished Bellefonte nuclear power plant in northeast Alabama, the Chattanooga Times Free Press reported.

* The three investor-owned utilities in California, Pacific Gas and Electric, Southern California Edison Co. and San Diego Gas & Electric Co., spent millions of dollars on lobbying campaigns in 2018 for legislative support aimed at protecting their investors from paying the cost of wildfires, The New York Times reported, Consumer Watchdog.

* Alabama Power Co. implemented an electric rate increase of about 3% to cover more than $200 million in government-mandated costs of closing coal ash ponds in the state, according to a report from al.com. The rate hike went into effect on Jan. 1.

* SolarEdge Technologies Inc. agreed to acquire Italy-based S.M.R.E. SpA, a provider of integrated powertrain technology and electronics for electric vehicles. Under the deal, SolarEdge will buy a 51% stake in the company from the founder and an additional two stockholders for $77 million, followed by a mandatory tender offer for the purchase remaining stake.

Natural gas

* The federal government shutdown is delaying the investigation into a deadly September 2018 series of gas explosions and fires in Massachusetts, potentially postponing related safety fixes that could come out of the investigation, according to one U.S senator.

* The Trump administration is moving forward with plans to open the Arctic National Wildlife Refuge for oil and gas drilling despite the ongoing partial shutdown of the government, The Hill in Washington, D.C., reported. The U.S. Bureau of Land Management is preparing to host meetings for the ongoing environmental review process tied to the Alaskan drilling plan.

* A proposal by CenterPoint Energy Inc.'s Minnesota gas utility to begin introducing renewable natural gas into the company's stream has been well received by renewable energy advocates, although some supporters want to see more environmental accountability associated with the program.

* Colorado Parks and Wildlife wants the U.S. BLM to limit oil and gas pads to one-per-square mile in critical big game habitat in its upcoming lease sale in March, The Associated Press reported.

Oil

* A number of U.S. energy funds, including those run by Victory Capital, Fidelity, Ivy Investment and Vanguard, produced heavy losses for investors due to a sharp drop in oil prices during the fourth quarter of 2018, the Financial Times reported. For instance, Victory Capital's Global Natural Resources fund lost 45.8% and Fidelity's Select Energy Service Portfolio dropped 44.1%.

* The Texas oil patch may be in for rough sledding as falling oil prices take a toll on the region, the Federal Reserve Bank of Dallas said in a series of local and regional outlooks.

* A WildHorse Resource Development Corp. investor sued the oil driller for allegedly failing to disclose "enough information about its finances" tied to its pending $4 billion merger transaction with Chesapeake Energy Corp., according to Bloomberg Law.

* Blackbird Energy Inc. and Pipestone Oil Corp. closed their strategic merger, resulting in the combination of two adjacent and contiguous Pipestone Montney land bases that would operate under the new name Pipestone Energy Corp. Paul Wanklyn will serve as president and CEO of the merger entity.

* 2018 was the first year since 2015 that crude oil prices ended the year lower than they started, and while the bear oil market weighed on oil and gas equities, ConocoPhillips was the only major pure-play producer to buck the trend.

* Exxon Mobil Corp. and Hess Corp. separately announced the start of drilling at the Haimara-1 exploration well 19 miles east of the Pluma-1 discovery in the southeast Stabroek Block in offshore Guyana. The growing resource base on the Stabroek Block underpins the potential for at least five floating, production, storage and offloading vessels producing more than 750,000 barrels of oil per day by 2025.

* Environmental activist Krystal Two Bulls requested a federal judge to dismiss her from a lawsuit filed by Energy Transfer LP for allegedly interfering with company business and inciting violence while opposing the $3.8 billion Dakota Access oil pipeline, the AP reported.

Coal

* American Resources Corp. entered into a two-year sales agreement to provide at least 50,000 tons of metallurgical coal per month to a global buyer of metallurgical coal.

* Yankuang Group Co. Ltd., the ultimate parent of Yancoal Australia Ltd., will purchase bonds belonging to the Hunter Valley coal mines in New South Wales, Australia, for US$200 million, as part of a previous financing deal, The Australian reported Jan. 7.

ChartWatch

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Five major offshore wind developers expressed an interest in submitting proposals to a New York solicitation, according to the New York State Energy Research and Development Authority.

New from RRA

* Continued firm export markets combined with higher steam coal demand pushed coal deliveries to peak levels to close out 2018, setting up brighter prospects for the first quarter of 2019.

The day ahead

* Early morning futures indicators pointed to a lower opening for the U.S. equity markets. To view more SNL equity market indexes, click here. To view more SNL Energy commodities prices, click here.

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Click here to read about today's financial markets, setting out the factors driving stocks, bonds and currencies around the world ahead of the New York open.

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