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AES targets up to 16% EPS growth; Army Corps halts permitting process on coal terminal

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


AES targets up to 16% EPS growth; Army Corps halts permitting process on coal terminal

Top news

is targeting 12% to16% average annual EPS growth through 2018, driven primarily by new projectsnow under construction coming online. AES expects to commission"6 GW of new capacity from projects currently under construction throughthe first half of 2019," AES President and CEO Andrés Gluski said duringthe company's first-quarter 2016 earnings call, adding that the total capitalexpenditure for the projects is $7.5 billion, with 74% of investments in theAmericas.

Appalachianshale drillers again produced a record amount of natural gas while spendingmuch less in the first quarter and now are waiting for higher prices as EagleFord and Haynesville producers slow down. Of the 10 largest publiclytraded producers in Appalachia, only Cabot Oil & Gas Corp. reported a year-over yeardecline in natural gas production in the first quarter, while drillers such asRice Energy Inc. and in thesouthwestern Marcellus and Utica drilled like it was hurricane season in 2008.

TheU.S. Army Corps of Engineers announced that it has halted the permittingprocess for the contested Gateway Pacific Terminal coal project in Washingtonin response to a challenge from the Lummi Nation regarding tribal rights. TheLummi argued that the terminal would affect fishing rights in waters protectedunder tribal agreements.

Power

*The California Public Utilities Commission is reassessinga settlementagreement that provided recovery of costs involving the prematureshutdown of the SanOnofre nuclear generating station, majority owned by subsidiarySouthern California EdisonCo. The regulator is reopening the case given SoCalEd's failure totimely report ex parte communications with the commission's former president,Michael Peevey, concerning its efforts to recover the costs. "[I]t isprudent to review whether the settlement reached before those disclosuresremains in the public interest and in accordance with our settlementrules," CPUC Commissioner Catherine Sandoval said.

*Enbridge Inc. hasinked an agreement to acquirea 50% interest in French offshore wind development company, Eolien MaritimeFrance SAS, for an investment of C$282 million. Under the deal, both companieswill co-develop three offshore wind farms off the coast of France that wouldproduce a combined 1,428 MW.

*Ohio Gov. John Kasich has tapped Asim Haque to replaceAndre Porter as the chairman of the state Public Utilities Commission. Portersteps down later thismonth to accept a position in the private sector; Haque has been a member ofthe PUCO since June 2013.

*Talen Energy Corp.increased its full-year 2016 earnings guidance to reflect the sale of certain assets.The company is now targeting full-year adjusted EBITDA of $655 million to $855million and adjusted free cash flow, or FCF, of $260 million to $460 million.The company had initiated its 2016 earnings guidance in February, targetingadjusted EBITDA of $635.0 million to $835.0 million and adjusted FCF of $250.0million to $450.0 million.

*Allegations that the PJMInterconnection LLC is shortening the lifespans of coal and nuclear plants byfailing to sufficiently compensate their generation are unfounded, a new reportclaims.

*Increasing wind and solar investments by power majors including , and ,reflects a strategy of taking advantage of the federal renewable-energy taxcredits to lower development costs and then selling power at higher prices whencompared to coal and natural gas, TheWall Street Journal writes.

* TheNew York Times carries a report that sheds light on New York Gov.Andrew Cuomo's efforts to counter climate change. If successful, Cuomo'sReforming the Energy Vision plan could help New York turn into a "globalpowerhouse of innovation" and pull it ahead of California on climatechange efforts.

*Grid Assurance LLC CEO Michael Deggendorf told BloombergNews that the company is in talks with potential subscribers for itsservices. Grid Assurance, which was proposed in June 2015, is an independentprovider of transmission sparing systems for critical electric transmissionequipment, and has been touted as a way for utilities to respond to natural orphysical damage to utility infrastructure. It is by andsubsidiaries of seven other utilities: Berkshire Hathaway Energy, Duke EnergyCorp., Edison International, Eversource Energy, Exelon Corp., Great Plains Energy Inc. and Southern Co.

*Emera Inc. recorded aC$64.8 million year-over-year decrease in first-quarter adjusted EBITDA to C$319.4million. The company booked first-quarter 2016 adjusted net income C$137.7million, or 93 cents per basic share, beating the S&P Global MarketIntelligence normalized consensus EPS estimate of 88 cents.

Natural gas/midstream

* Acoalition of 60 conservative groups is urgingthe House Energy and Commerce Committee and the Senate Environment and PublicWorks Committee to take action on the U.S. EPA's National Ambient Air QualityStandard for ozone and to reform the rulemaking process for ozone and otherpollutants regulated under NAAQS. In 2015, the EPA lowered the compliant levelof ozone from 75 parts per billion to 70 parts per billion."[T]he EPA already has another set of regulations dealing exclusively with[particulate matter]. Either the EPA has woefully inadequate standards for PMor it is effectively "double counting" the health benefits of PMreductions to justify the ozone regulation," the groups said in a letter.

*The first quarter was brutal for several large independent U.S. oil and gasproducers, but the leadership of Anadarko Petroleum Corp., and see as theyscramble to cut costs and gain access to capital.

*Chaparral Energy LLC filedfor Chapter 11 bankruptcy protection to help restructure approximately $1.2billion in debt. The company has also filed motions seeking authority to pay expensesassociated with production operations and drilling and completion activities,among other things.

* Oilfield services company Seventy Seven Energy Inc. is urging its lenders to approve ajoint prepackaged plan of reorganizationby 5 p.m. ET on June 3 ahead of a potential Chapter 11 filing. The plan willconvert $1.1 billion of existing debt into new common equity, among otherthings.

Coal

*Westmoreland Coal Co.reported first-quarter 2016 netincome attributable to common shareholders of $30.6 million, or $1.67 pershare, compared to a net loss of $11.7 million, or 67 cents per share, in thecomparable 2015 quarter.

*U.S. energy-related CO2emissions in 2015 were 12% below 2005 levels primarily due to a decrease in useof coal and an accompanying increase in the use of natural gas for electricitygeneration, accordingto a report from the U.S. Energy Information Administration.

*Arch Coal Inc. filedtheir reorganizationplan with a federal bankruptcy court, including updates on employeebenefits and reorganization data but with little information on meeting futurereclamation obligations.

Commodities

*April hydroelectricpower production surged above historical averages in the PacificNorthwest as warm weather depleted much of the region's snowpack.Even as the regionexperienced below-normal precipitation, data from the U.S. Army Corps ofEngineers show that total net generation at 23 hydroelectric plants across thePacific Northwest was 41.9% above the year-ago level and 18.4% above the12-year average as it reached 8.03 million MWh. That figure is up 2.1% fromMarch.

*After notching a scant 0.3-cent decline in the week's opening session to asettle at $2.098/MMBtu, June natural gas futures overnight ahead of theTuesday, May 10, open, as varied weather-related demand expectations combinewith what has thus far been a slow pace of storage-building that isnevertheless keeping inventories robust. The contract was last eyed 4 centshigher at $2.138/MMBtu.

*Daily power prices at major market centers around the country are likely to seechoppy to higher moves Tuesday, May 10, as participants eyeball mixed demandoutlooks but potential gains for natural gas. Losing 0.3 cent in the priorsession, June natural gas futures were trekking higher early Tuesday ahead of the opening bell,moving at $2.131/MMBtu, up 3.3 cents on short covering.

New from RRA

*Over the past severalyears, rate freezes, which are defined as arrangements under which energyutilities are prohibited from filing rate cases or implementing rate changesfor a period of time, have been utilized in different contexts.

*U.S. broader markets finisheddown last week on economic concerns driven by a disappointing Apriljobs report and slow first-quarter U.S. GDP growth that was stifled by lowerbusiness investment. Oil prices fell last week after four weeks of gains,closing the week down 2.7% to $44.66/bbl.

Quoted

"Itis a historic victory for the Lummi Nation and our entire region. We arepleased to see that the Corps has honored the treaty and the constitution byproviding a decision that recognizes the terminal's impacts to our fishingrights. This decision is a win for the treaty and protects our sacred site. Ourancient ones at Xwe'chieXen, Cherry Point, will rest protected,"said Tim Ballew II,chairman of the Lummi Indian Business Council, on Army Corps' decision to stopcoal terminal permitting.

The day ahead

* At8 a.m. ET, Talen EnergyCorp. will holdits first-quarter 2016 earnings call.

* At10 a.m. ET, EmeraInc. will holdits first-quarter 2016 earnings call.

* At11 a.m. ET, CenterPoint EnergyInc. will hold itsfirst-quarter 2016 earnings call.

* At2 p.m. ET, VectrenCorp. will holdits first-quarter 2016 earnings call.

*Early morning futures indicators pointed to a higher 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.