The energy world is changing fast, and utilities can't seem to dump coal fast enough. Here are three companies making the switch from coal to natural gas.
Duke Energy (NYSE: DUK ) is hard at work on a $9 billion modernization project that will vastly transform its power fleet. The utility will have retired 3,800 MW of coal by the end of this year, with plans for 2,500 more in the works. Once the coal dust has settled, 25% of Duke's coal fleet will have disappeared.
But Duke Energy isn't just cutting back. It's also adding on a variety of new power sources -- and natural gas will make up a big part of the new and improved power company. Just this week, Duke Energy announced that a 600 MW natural gas plant is officially open for business, taking the place of an old 575 MW coal plant. Not only does the new plant open up the door for cheap natural gas use, but it also cuts sulfur dioxide emissions by 99%, nitrogen oxide by 97%, and carbon dioxide by 41%.
It may have seemed impossible for coal-centric TECO Energy (UNKNOWN: TE.DL ) to ever turn the corner on its coal habit, but the utility has made leaps and bounds over the past year to diversify its offerings. The vertically integrated company owns and operates coal interests from the mine shaft to the power line, but a $950 million purchase of regulated New Mexico Gas Company in May changed this utility's strategy for the better .
"We are adding 50% to our customer base in a single transaction," said President and CEO John Ramil -- and these are customers that pay regulated rates for a different type of energy. The company's other big natural gas stake, People's Gas, could also see sales soar over the next five years as commercial vehicles increasingly rely on natural gas. The subsidiary has 14 fueling stations spread across Florida, a state that's increasingly meeting new energy demand with natural gas.
NextEra Energy (NYSE: NEE ) and Spectra Energy (NYSE: SE ) announced this summer that the two utilities would team up to build a $3 billion joint-venture natural gas transmission line -- the Sunshine State's third major pipeline. With more of the fuel pouring into the area, TECO Energy, NextEra Energy, and Spectra Energy could all benefit as this natural gas becomes the new norm for electricity, commercial transport, and even energy exports.
Dominion Resources (NYSE: D ) has been backing away from traditional fuels as it increases its natural gas investments. The company shuttered a 566 MW nuclear plant in May and sold off three coal-fired plants in September.
In the same month, Dominion Resources received approval to export LNG to non-Free Trade Agreement countries, paving the way for new international markets. The utility is also busy loading up its gas tank here at home. Dominion Resources' 1,329 MW Warren County Power Station is 60% complete and should be operational by late 2014 or early 2015.
The utility's high-profile regulatory thumbs-up helped boost shares to above-average valuation, but current shareholders can keep hanging on to significant gains achieved over the past year.
Natural gas for the win?
Natural gas isn't investor gold. Prices are headed higher, and a continually topsy-turvy energy world make cost-competitiveness difficult to predict. But for those companies heading to natural gas to diversify away from expensive and polluting fossil fuels, as well as to expose themselves to new markets, they're inherently better off than before.
The next energy boom
Record natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.