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9/25/25 Capitalist Times Live Chat

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Roger Conrad

5:24

So you know, Eversource's (NYSE: ES) actual exposure to Revolution Wind and Orsted's (OTC: DNNGY) other major offshore wind project Sunrise is basically regulated transmission infrastructure already approved for rate base by state regulators. The company sold its direct investment in the projects. Not letting these already nearly ready assets enter service will tighten supplies in New England starting this winter. So ES will have less headroom to increase rates to pay for utility infrastructure as customers' overall electric rates will rise. But its credit rating, growth guidance and dividend are insulated.

I think it's always a good idea to diversify your holdings and bank some gains. And it's likely that if either Sunrise or Revolution doesn't enter service that ES will sell off at least a bit.

I do think the administration had a remarkably poor case for stopping work on Revolution. But they certainly may try to come back with a stronger one. These projects aren't home yet.

Dan N

5:35

To a couple questions: can Ørsted and/or Eversource at some point sue and collect damages from the govt?

Roger Conrad

5:35

Eversource does not have ownership In Revolution, so I don't see the case for them collecting damages. Orsted may eventually try, but I think right now they're probably more concerned with accelerating construction--so they can get these projects finished before the contract expires with the construction vessel--unlike Dominion Energy (NYSE: D) they don't own their own vessel in the area.

On the larger point of how likely they would be to collect damages, my personal view is the administration well over stepped their purview by stopping work on a nearly completed, fully permitted energy project. I think if they are ultimately successful shutting it down, it sets a very dangerous precedent for all US energy investment. And I think investors will begin to require a premium to commit to anything here--especially oil and gas as this will be a playbook for "keep it in the grounders."

The bright side is this all plays to scarcity, which should be good for energy stocks, including ironically wind producers.

RBB

5:51

Given the current fluid interest rate environment in the bond sector, what are your current thoughts regarding TLTW for intermediate and long term ? TIA

Elliott Gue

5:51

I still like TLTW here. Because of the underlying Buy/Write covered call strategy, TLTW performs best when TLT (basically long-term Treasuries) are range-bound, which pretty much sums up the environment here since late last year.

This also explains why TLTW is up just under 10% this year, more than double the 4.9% gain in TLT. What would prompt me to recommend selling TLTW from the Smart Bonds portfolio, and rotate into TLT, would be signs a US recession is imminent. We're just not there yet.

For straight Treasury and IG corporate bond exposure (no covered call overlay) I continue to favor the belly of the curve in Smart Bonds -- intermediate term bond ETFs over reaching for duration in a name like TLT.

Dan N

5:52

I read that ES, despite having exited the offshore project, could still be on the hook for additional costs due to having guaranteed a minimum rate of return to the buyer. True? And if so, how big a deal would this be if the project continually stalls and can’t complete?

Roger Conrad

5:52

Hi Dan. Reading from page 18 of this year's 10-K where the risk is disclosed, "we have continuing financial exposure as it relates to the purchase price post-closing adjustment payments under the terms of the sale agreement." That includes Revolution wind final construction costs, which in the case of overruns would essentially come out of what the company receives. But ES has also recorded a "contingent liability" of $365 mil against the $745 mil purchase price. So the only earnings impact would be something above that level, which approximately one month stop work did did not exceed. The company has no additional obligation for Sunrise or South Fork Wind--the third facility it partnered with Orsted on.

There's also a provision that would have reduced the selling price if the project did not qualify for tax credits. But it will under OB3 and the IRS ruling that clarified it.

Bottom line--ES has some exposure here and the stock would likely sell off a bit if Revolution isn't completed.

Roger Conrad

5:52

But this is not a major risk to EverSource' growth, dividend or credit rating at this time.

Dan N

5:54

And how do you like POR? Thanks!

Roger Conrad

5:54

We rate it a buy at 45 or lower. The biggest risk is Oregon regulation but the company has managed it well. And there's considerable upside from investment to meet rising electricity demand, as well as a yield of nearly 5%.

I cover it in the Utility Report Card of Conrad's Utility Investor. If you're unfamiliar with the advisory, give Sherry a call at 877-302-0749 (M-F, 9-5 ET) to find out more.

Thanks for your questions today!

Susan P

5:58

Apologies if Black Stone Mineral has been addressed previously. If not, wondering if you think the past month's recovery of roughly 8% can continue? BSM is still down 9% YTD but curious if some improvement in nat gas and/or possibly fewer shorted shares might help the unit price continue higher. FYI, I don't expect the recent small div cut to be changed any time soon...Thanks again for the chat and various subscriptions you both produce.

Roger Conrad

5:58

Hi Susan. I think Black Stone's share price (and ultimately the dividend) is going to basically follow the price of natural gas.

The dividend cut freed up some cash to help accelerate development on its lands, which all else equal should increase the output side of the profit equation--the Ellipsis deal is particularly promising. But end of the day, it all hinges on what happens to the price of natural gas--which we remain long-term bullish on.

Tough to forecast timing of a recovery. But I think we're still getting paid pretty well to wait for one.

Jim

6:03

OKLO has no revenue stream no plans for a FUSSION reactor but is up to $120 on air. Being sold as the data center future for power. Is this worth a look?

Roger Conrad

6:03

Hi Jim. I think there's a pretty good case to be made that these earnings-less nuclear stocks are just as big of a bubble as "green" stocks were in the early days of the Biden administration.

When the stock market is liquid as it is now, money likes to chase themes to extremes. A number of leaders of the green boom are larger and more profitable than ever--but their stocks are still heavily discounted to their 2021 highs. And a number of the earnings-less green companies no longer exist.

OKLO has the advantage of being closely connected to the DOE secretary. Say what you will, but that's a big reason it trades at such a high price with no earnings of hope of any absent massive government subsidy.

I've advised Conrad's Utility Investor to take partial profits on America's real nuclear leader Constellation Energy (NYSE: CEG), which does make money. My view is anyone who owns OKLO at these levels shouldn't look a gift horse in the mouth.

Roger Conrad

6:05

Nuclear power is a key element of America's power stack--and is likely to be for decades to come. And when industry has a commercial model that utilities can take to regulators and investors with credible cost estimates and construction times there will be orders.

But if history is any guide, many of the hot stocks now are going nowhere but down.

6:06

Q. Are distributions on pagp and hesm considered return of capital? Thanks Eric D.

6:07

A. That will likely vary from quarter to quarter. But a substantial chunk of them are likely to be.

Frank

6:07

Freeport Mac had a mudslide or mudwave in it's large Indonesia Copper mine that will keep it offline for sometime. What are the implications for copper and the other miners in the field

Elliott Gue

6:07

The read-across is pretty clearly bullish copper and we did see a pop on the news.

One copper stock we recommended as a trade in our CT Trader service is Hudbay Minerals (HBM), which is primarily a copper producer. They also have some precious metals production volumes and silver, in particular, has been an absolute moonshot in recent days, closing over $45/oz today.

While that's an interesting name to watch, I would say that we recommended that trade back in July and the stock has run up a lot since them. So, earlier this week we actually recommended taking some off the table as it was up 30% since recommendation (it's now up a bit more). So, basically, the fundamentals look solid, but HBM looks a little extended near-term.

Roger Conrad

6:08

Hi Elliott:

Somehow, with my energy investments, I have not played it well this year.... After Trump's election, with "drill baby drill", I stayed away from the energy producers, and invested instead in the pipeline companies, thinking that with low energy prices and Trump's desire to export more energy, they would do well.... And they did well up until the April swoon, but have not recovered very much since.. And recently HESS Midstream took a hit as its guidance going forward was at the low end of its estimated range....

What do you feel is the future of our recommended pipeline companies in terms of price appreciation? Although they are giving a nice return, it's a little disappointing seeing the return people have gotten with technology stocks and the major averages. And what do you think is the cause of HESS MIdstream's disappointing guidance?

Thanks,
Jack A.

6:11

A. Hi Jack. Our strongly held view is too many investors pay too much attention to politics too much of the time. Pipeline stocks' performance this year has lagged the S&P 500--which has risen mainly because the 8 Big Tech stocks now 37% plus of the index have gotten even more expensive. But on average, returns on the stocks in the model portfolio are still making money this year--which is after all year 5 of the up cycle.

6:13

We addressed the Hess Midstream guidance change at length in the issue of EIA that posted this week. And the takeaway is investors are reacting to Chevron's plan to reduce Bakken rigs from 4 to 3. But the MVCs underpinning the dividend and dividend growth target (3-5%, it's been more lately) must be paid by Chevron even if it stopped all regional production. So the dividend north of 8% is secure. And I'll point out, the share price right now after the decline is right at the highest point we were recommending it as a buy.

6:15

Bottom line, we do not view Big Tech outperformance this year as a reason to abandon best in class midstream stocks. Odds are, the roles will be reversed in the near future, quite possibly with a vengeance.

6:17

Those were a couple of pre chat questions we received and didn't answer beforehand. And I think we're now pretty much wrapped up here.

6:18

Thank you everyone for joining us today! We will get that transcript out to you tomorrow morning. And once again, hope to see many of you in Orlando next month!

Have a great evening!

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