No Systemic Risk to Utilities Despite Constellation Merger
The recent Constellation Energy (NYSE: CEG) near-debacle and rescue by Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) and MidAmerican Energy is not indicative of systemic risk to the utilities sector, according to CreditSights.
In light of the CEG near-debacle, CreditSights decided to take a look at trading and liquidity risks in a number of utilities. “Of the 11 we looked at … two, DTE Energy (NYSE: DTE) and Entergy, (NYSE: ETR) seemed riskier to us for various reasons, so we have moved to underweight these two names. We also moved PPL(NYSE: PPL) from overweight to market weight. Its trading activity is not likely to be rewarded by the market in this environment.”
Overall, though, we do not think that the CEG situation was indicative of systemic risk to the sector, so we are maintaining our current sector overweight and the remaining individual overweights and underweights.
Details are available in Utilities: Still a Safe Harbor, but Storm Warnings for Two.
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