U.S. utilities have lost their appetite for merchant generation. Weak electricity demand, renewable energy growth, and falling natural gas prices have squeezed margins.
Several large utilities have reduced or eliminated their commodity-sensitive businesses, and FirstEnergy (FE) soon will join them. By 2019, we expect FirstEnergy’s earnings will come entirely from less-volatile fully regulated businesses, many with wide and narrow economic moats. As a result, we recently upgraded our moat rating to narrow from none.
Charles Fishman, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.