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Power sector trends to continue in 2017; Anadarko's sale a $1.2B twist for buyer

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Power sector trends to continue in 2017; Anadarko's sale a $1.2B twist for buyer

Top news

Electric industry trends to continue in 2017, with cautious eye on interest rate

With key changes in energy policy and leadership in store for 2017, industry observers still expect electric utilities to continue investments in clean energy and infrastructure modernization, with an appetite for further consolidation. Some on Wall Street, however, believe that the sector's strong financial run is grinding to a halt.

Anadarko's Marcellus sale a $1.2B twist for buyer, a veteran shale land flipper

The private company paying $1.24 billion for Anadarko Petroleum Corp.'s northeast Marcellus Shale operations has a track record of finding, proving and flipping land in shales across the U.S. and Canada but had never bought into a developed field like this. The assets include about 195,000 net acres with gas production volumes of about 470 MMcf/d.

Peabody to 'not only survive but to thrive' as bankruptcy wraps in coal rebound

The last of the U.S. coal mining giants to exit bankruptcy after the recent turnaround plans to come back largely intact. Peabody Energy Corp. announced late Dec. 22 it plans to emerge from bankruptcy in the second quarter of 2017 after reducing its pre-bankruptcy debt by more than $5 billion. The plan, supported by Peabody's creditors, anticipates Peabody emerging as a public company, but with its current equity securities canceled and extinguished.

Power

* FERC has conditionally approved Atlas Power's proposed $3.3 billion acquisition of a 9,058-MW portfolio of fossil power plants in the U.S. from Engie. In its Dec. 22 order, FERC said the applicants "have not demonstrated" that the proposed deal will not adversely affect competition in the PJM Interconnection LLC's ComEd and ISO New England Inc.'s SENE capacity zones. Atlas Power was formed by Dynegy Inc. and Energy Capital Partners LLC in February. Dynegy will become sole owner of Atlas Power upon completion of its proposed acquisition of the remaining 35% stake in the JV from Energy Capital.

* AES Corp. and Tesla Motors Inc. are the latest buyers to emerge for what remains of SunEdison Inc.'s solar assets. In separate filings on Dec. 22 in U.S. Bankruptcy Court for the Southern District of New York, counsel to SunEdison spelled out agreements for the sale of select Minnesota solar assets to AES affiliate AES Distributed Energy, Inc., as well as the sale of unused solar equipment to Tesla.

* The U.S. Department of Energy is adopting a final rule that will protect whistleblowers who report nuclear safety issues. Under the rule, the agency may assess civil penalties against contractors and subcontractors for retaliating against whistleblowers. The rule will go into effect Jan. 26, 2017.

* Separately, the DOE has given the green light to the Waste Isolation Pilot Plant near Carlsbad, N.M., to resume storage operations, The Wall Street Journal reports. The underground nuclear waste repository had been closed for nearly three years following a radiation accident.

* California Jerry Brown is vowing to defend and strengthen policies to combat climate change and reduce CO2 emissions. "California can make a significant contribution to advancing the cause of dealing with climate change, irrespective of what goes on in Washington,” Brown told the New York Times in an interview. "I wouldn't underestimate California's resolve if everything moves in this extreme climate denial direction. Yes, we will take action."

* Tesla Motors Inc. and Panasonic Corp. have finalized an agreement to manufacture solar photovoltaic cells and modules at a Buffalo, N.Y., factory, beginning in the summer of 2017. The companies expect to ramp module production to 1 GW by 2019, according to a news release. Under the agreement, Panasonic will cover required capital costs in Buffalo, with Tesla making a long-term purchase commitment from Panasonic.

* Clean Line Energy Partners has temporarily withdrawn an application for its Rock Island Clean Line transmission project to allow a pending court challenge in the Illinois Supreme Court to be resolved. The 500-mile high-voltage, direct-current line's approval by the Illinois Commerce Commission has been challenged by local landowners and Chicago-area utility Commonwealth Edison Co., a subsidiary of Exelon Corp.

* The Hawaiian Electric Cos. have filed an updated energy plan that forecasts the companies will exceed the state's renewable energy milestones in 2020 and can exceed the milestones in 2030 and 2040. The plan forecasts the addition of 360 MW of grid-scale solar, 157 MW of grid-scale wind and 115 MW from demand response programs. The Hawaiian Electric Cos., or HECO, are Hawaiian Electric Co. Inc., Hawaii Electric Light Co. Inc. and Maui Electric Co. Ltd.

* Toshiba Corp. said it may record a goodwill charge of several billion U.S. dollars in connection with Westinghouse Electric Co. LLC's acquisition of CB&I Stone & Webster Inc.'s nuclear construction and integrated services business, according to a company statement.

Natural gas/midstream

* A report that the private equity giant Blackstone Group LP is looking to buy a multibillion-dollar stake in Energy Transfer Partners LP projects or assets sent analysts and stock traders to their tea leaves. The Wall Street Journal reported Dec. 22 that Blackstone was kicking some ETP tires, citing "people familiar with the matter."

* Two Republican lawmakers from Alaska, Sen. Dan Sullivan and Rep. Don Young, are mulling proposing legislation that would allow President-elect Donald Trump to overturn President Barack Obama's new bans on oil drilling in parts of the Arctic and Atlantic oceans, The Hill in Washington D.C., reports.

* A pipeline that is designed to supply natural gas to the Bear Head LNG export terminal in Nova Scotia was approved by the province's Department of Environment, which developers had said was "essential" for the project to move forward. The 38.8-mile pipeline, known as Bear Paw, will carry gas from Goldboro, Nova Scotia, to the terminal on Cape Breton.

* Nearly 58% of Canadians agreed or somewhat agreed that Canada should move forward with a plan to place a tax on carbon to help reduce greenhouse gas emissions even if the incoming Trump administration moves in a different direction, according to a poll from Nanos Research Group and The Globe and Mail. Meanwhile, 66% of Canadians support or somewhat support the approval of Kinder Morgan Inc.'s Trans Mountain pipeline that will carry Alberta heavy oil to the port of Vancouver for markets in Asia.

* Bonanza Creek Energy Inc. will move forward with a proposed prepackaged plan of reorganization early next year to eliminate more than $850 million in senior debt and raise $200 million in additional liquidity from an equity rights offering. The proposed plan has the support of a majority of the holders of its 6.75% senior notes due 2021 and 5.75% senior notes due 2023 and one of the company's crude oil purchase and sale pipeline counterparties, NGL Crude Logistics LLC and its parent, NGL Energy Partners LP.

* Savanna Energy Services Corp.'s board is recommending shareholders to reject an offer from Total Energy Services Inc. to buy all shares of Savanna for 0.13 apiece of Total for each share of Savanna. The offer "significantly undervalues the common shares of Savanna, is not in the best interests of Savanna or its shareholders," the board said.

Coal

* An environmental group intends to challenge Peabody Energy Corp.'s proposed reorganization plan for failing to adequately address reclamation obligations. "We've continued to be present and engaged in the bankruptcy proceeding," Howard Learner, an attorney for the Environmental Law and Policy Center, told S&P Global Market Intelligence. "We will object in the bankruptcy court."

* The Canadian operator of the world's first successful carbon capture and sequestration power plant has defended the facility from attacks in a lawsuit against the U.S. EPA's carbon performance standards for new coal- and natural gas-fired power plants. SaskPower said in a Dec. 22 brief to a federal appeals court that the coal-fired generator is working just fine, and outages that the rule's opponents have pointed to as evidence of the project's failure were in fact routine.

* Two small Pennsylvania coal companies filed for Chapter 11 protection from creditors Dec. 22 in the U.S. Bankruptcy Court for the Western District of Pennsylvania. C&D Coal Co. LLC, which operates the Kingston West bituminous coal mine in Westmoreland County, has estimated liabilities between $10 million and $50 million. An affiliated company, Derry Coal Co. LLC, estimated its assets and liabilities at between $1 million and $10 million each in its filing.

Commodities

* The latest data on rig counts from Baker Hughes Inc. showed that a rise in the number of rigs targeting crude oil and natural gas helped to push the total U.S. rig count to the highest level in nearly 12 months. The U.S. total rig count gained 16 to reach 653 during the week ended Dec. 23. It was the highest reading since the week ended Jan. 8.

* New Jersey solar renewable energy credit prices were mixed during the week ended Dec. 23. Energy-year 2016 SREC prices in the state posted an index at $228.75/MWh, up $1.25, while the energy-year 2017 market was assessed at $234.38/MWh, losing $1.25 week over week.

* After a finish 12.4 cents higher at $3.662/MMBtu ahead of the long Christmas holiday weekend, January 2017 natural gas futures extended gains in overnight trading leading up to the Tuesday, Dec. 27, open, amid expanding cold in forecasts that should boost heating demand in the coming weeks and allow for a continuation of the accelerated rate of storage erosion of late.

* Power prices at the daily markets could climb coming off the long Christmas holiday weekend Tuesday, Dec. 27, as prospects for generally rising demand as the truncated workweek unfolds combines with ongoing gains at the natural gas futures arena. At last glance, January 2017 natural gas futures were trading 7.7 cents higher at $3.739/MMBtu.

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New from RRA

* On Dec. 22, the North Carolina Utilities Commission adopted a stipulation thereby authorizing Virginia Electric and Power Co. a $34.7 million permanent electric base rate increase.

* On Dec. 22, the Public Utilities Commission of Nevada voted unanimously to adopt a settlement, thereby requiring Sierra Pacific Power Co. to reduce electric and gas rates by $2.9 million (-0.4%) and $2.4 million (-2.2%), respectively, effective Jan. 1, 2017.

* On Dec. 22, the Kentucky Public Service Commission adopted a settlement, with certain modifications, thereby authorizing Columbia Gas of Kentucky Inc. a roughly $18 million — 19.4% of base revenues — gas distribution base rate increase.

Quoted

"Tax reform introduces risk for many names that may outweigh benefits, and currently the utility group appears to have little or no valuation cushion left against another interest rate move higher," J.P. Morgan Securities LLC analyst Christopher Turnure wrote in a research report. "We see companies with profitable non-utility, non-renewable businesses and stronger balance sheets as best positioned."

The day ahead

* 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.

The Daily Dose is updated as of 7:30 a.m. ET. Some links may require registration or a subscription.