Utility investors already hurt by Obama CO2 plans

March 11, 2009

Utility investors don’t need to wait for CO2 regulation to be implemented to be harmed — the specter of CO2 regulation by the Obama administration and Democrat-controlled Congress is already reducing dividend payments and harming stock prices.

The Wall Street Journal reported today that the only sector performing worse in the stock market than the banking sector is the utilities sector. The WSJ reported,

Strategists point to concerns about the Obama administration’s efforts to limit carbon emissions through a cap-and-trade program that would tax offenders, including many utility companies, along with concerns about higher financing costs and reduced demand.

These concerns contributed to recent 30% and 50% dividend cuts by Ameren Corp and Great Plains Energy, respectively, and declines in the share prices of stocks like Duke Energy and Consolidated Edison.

The WSJ noted that,

Utilities were hardly standouts in 2008; the sector fell nearly 32%, but that was third best among the 10 industry sectors and short of the S&P’s 39% decline. The stocks weren’t particularly weak in the early part of the year, but as expectations for climate-control legislation have risen, so too has investor concern, because of the potential cost for utility companies.

In commentary last week, Sanford C. Bernstein & Co. analyst Hugh Wynne noted that climate-control legislation is high on the list of priorities of Democrats in the House and Senate. He said a bill that was moving through Congress last year may be resuscitated, one that he said was “guided in large part by the need to establish support for climate change legislation among coal state Democrats and affected industries.”

Steve Milloy’s new book, Green Hell: How Environmentalists Plan to Control Your Life and What You Can Do to Stop Them, discusses how green policies will make it more difficult to invest for retirement, college and other long-term financial needs.

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