America's electric utilities are about to sink a small fortune into a desperately-needed upgrade of the nation's power grid. How can an investor plug his portfolio into this upgrade? JPMorgan's Andrew Smith has some ideas.
"The one pure-play transmission company is ITC Holdings," he told CNBC. "They own nothing but transmission lines, own, operate, and build them, and also stand to benefit very well from that. The Energy Policy Act of 2005 put together a number of incentives for transmission investment...that allow a company like ITC to benefit very significantly."
He also likes Entergy and Dynegy.
"Entergy is in the process of spinning off its pure-play unregulated nuclear power-plant fleet, that in the absence of new power-plant development, increases significantly in value," he said. "Likewise, as we talk about restricting greenhouse gas emissions in the U.S., the value of those nuclear plants, which have no (carbon dioxide) emissions, increases fairly sharply."
Dynegy's appeal is slightly different: "It is more conventional in terms of a broad mix of fuels," he explained.
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ITC Holdings, Entergy, and Dynegy are all investment-banking clients of Smith's firm.