NEW YORK (Reuters) - U.S. electricity company stocks have returned to health, posting market-leading returns over the past two years as steady economic growth helped work off a glut in supply and companies cleaned up their balance sheets.
Over the past year, U.S. utility and power stocks have rallied 31 percent, and even with investor profit taking over the past few weeks, they have outperformed the broader Standard & Poor 500 .SPX index's 21 percent gain.
That is good news for investors, who saw the Standard & Poor's Utility index shed more than half its value in 2001 and 2002 on the gloom caused by the collapse of Enron Corp., the California energy crisis, an overcapacity in power generation and plummeting industry credit ratings.
Those problems are now just distant memories.
"Utility stocks have been the darlings of the market," said Timothy O'Brien, portfolio manager for Evergreen Investments' utility fund, with $750 million under management.
"I would say they're not cheap, but I don't know that it would be fair to say they're expensive."
But along with the resurgence, the industry faces new risks, from the growing movement to regulate carbon emissions to the aging network under ever-increasing pressure from consumers and regulators.
Those issues, as well as the shifting landscape in the global oil markets, the sharp rise in alternative energy systems and the difficulties facing large consumers of gas and power will all be in focus at the Reuters Global Energy Summit from June 4-7.
Reuters journalists in New York, London and Singapore will sit down with industry players from OPEC, major power companies, oil producers and refiners to discuss their views on the sector that reaches deep into nearly every business across the globe.
The rising impact of measures to control carbon emissions and stem climate change are changing the way industry operates. Even with those challenges, demand for nearly every form of energy is rising, particularly in China and India due to torrid economic growth, but also in the mature Western economies.
In the power sector, wholesale power companies have fared the best, operating in some of the deregulated U.S. regions where demand growth has caught up with the oversupply that depressed prices after the industry added dozens of power plants from 1998 to 2002.
That demand growth may slow as consumers trim back their usage in the face of rising prices, but so far, no impact has been felt.
In a recent note to investors, Credit Suisse analysts forecast U.S. electricity demand would slow from about the current 1.75 percent annual growth to about 0.5 percent in 2020.
"I'm surprised frankly that it hasn't had a dampening effect on the economic growth already, but it apparently hasn't," O'Brien said.
(For summit blog: summitnotebook.reuters.com/)
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