July 17, 2020 Read More →

Utilities that went on natural gas binge now trying to reconcile purchases with climate goals

S&P Global Market Intelligence ($):

Environmentalists and consumer advocates for years have complained that utility companies are piling up risks by continuing to invest in natural-gas infrastructure even as the costs of cleaner alternatives fall and scientists warn about the threats posed by climate change. With the recent explosion in sustainable investing, utilities are under even more pressure to slash greenhouse gas emissions, and some may well face “a lot of stranded-asset exposure” said Jim Hempstead, a managing director of global project and infrastructure finance at Moody’s.

In a sector where investment and earnings are tightly regulated, though, that exposure does not necessarily translate into “stranded-asset risk” for companies, Hempstead said July 14 during an online conference hosted by the Institute for Energy Economics and Financial Analysis, or IEEFA.

“The vast majority of the situations we’ve seen, the regulators have allowed recovery of these assets in some way, shape or form,” Hempstead said. “So the impact of a large impairment or a write-off is relatively low, in our opinion.”

Even so, utilities including Duke Energy Corp., which aims to achieve net-zero carbon emissions by midcentury, will have to engage in “comprehensive investor conversations” this fall to reconcile their climate goals with investments they plan to make in new resources, Julien Dumoulin-Smith, an analyst at Bank of America, said at the IEEFA conference.

[Michael Copley]

More: Utilities face tough choices in meeting climate goals after natural-gas binge

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