Nearly 2 million electricity customers across Florida remained without power Friday, a modest improvement from the day before as the state looks to recover from Category 4 Hurricane Ian, a storm tagged as one of the worst ever to hit that part of the U.S.
“There is no doubt [Florida’s] electric system has suffered serious damage and that customers will be without power for a significant amount of time. That said, residents should draw some solace that we believe the NextEra NEE, -1.95% -owned Florida Power & Light is the best managed utility in America, particularly as it pertains to storm recovery,” said John Bartlett, president of Reaves Asset Management.
With a utilities focus, Bartlett and team run the Reaves Utility Income Fund UTG, -2.05%, which is down roughly 9% from where it stood at this time last year. It has a dividend yield of 7.7%. The S&P 500 SPX, -1.51% is down 16% in the same span. Meanwhile, the Virtus Reaves Utilities ETF UTES, -1.62% is down 3.6% year to date but up 4.5% from where it stood one year ago.
“Utilities exist to be a public service, right? And so, as a practical matter, they’re sort of the most malleable thing that the government has to implement its environmental policy,” he said. “Top of mind are the tax credits, but more importantly, the transferability of tax credits. This is not money in the utilities’ pocket.
Which utilities jump on the incentives and smartly frontload capital spending for the inevitable future of electricity will matter.
It’s called ‘transition’ for a reason Because renewables are more capital intensive than existing and new fossil fuel infrastructure, building new renewables also empowers utilities to increase returns through the energy transition. As one example, Morgan Stanley researchers found that coal-heavy utility stocks have major potential for revaluation if utilities embrace near-term “coal to clean” investment strategies.