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April 2025 Capitalist Times Live Chat
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Tommy
4:12
With today's report on the economy contracting in Q1, what is your current perspective on adding money to the strongest portfolio companies, both utilities and energy companies?
AvatarRoger Conrad
4:12
Hi Tommy. We think that's a good idea. One quarter of negative growth doesn't make a recession--and GDP is both notorious for wide revisions and essentially a lagging indicator. But we've viewed the risk of recession as meaningful for some time. And it's continued to influence our stock selection in model portfolios across our advisories.

We do continue to advise sizable cash positions across our advisories--including Energy and Income Advisor and Conrad's Utility Investor. But we're absolutely comfortable holding what we have in those model portfolios. And adding incrementally to positions in great companies when prices drop is probably the surest way to build real wealth.

As for utilities, they're not wholly immune from recessions. But the electrics we've recommended are benefitting from the fastest real time growth in power demand we've seen since the 1960s at least. And while energy stocks will likely go lower if the economy really slides here, we believe we're still in a super cycle.
AvatarRoger Conrad
4:13
Bottom line: Good time to add to energy and utility holdings, with the caveat that everything could get a bit cheaper in the near term.
Mack
4:17
I am looking for an MLP to add to my portfolio.  (MLP & not C-corp.)  Considering PAA or SOBO.  Considering overall financial condition, safety of the payout, & likelihood of increasing payouts, do you think one is a better buy than the other?  Thanks so much.
AvatarRoger Conrad
4:17
Hi Mack. South Bow is a C-Corp, spun out from TC Energy late last year. Plains is an MLP. Other MLPs in the EIA model portfolio are Enterprise Products Partners (NYSE: EPD), Energy Transfer LP (NYSE: ET) and MPLX (NYSE: MPLX). Hess Midstream is actually a C-Corp for tax purposes, despite the name.

Between Plains and South Bow, I would expect Plains to raise its dividend at a faster rate the next few years as it restores its pre-pandemic dividend rate.
AvatarRoger Conrad
4:25
This is answering the other half of Susan's question concerning METC--Ramaco Resources the metalurgical coal company. Met coal companies basically produce for steel manufacture. Ramaco's 100% US production base means it's not subject to tariffs, which should advantage it to the extent US steelmakers take advantage of the 25% import tariff to ramp up output. Q1 results and guidance are  expected in early May and there's every reason to expect the company to meet its previous 2025 guidance for a 15% boost in tonnage. The payout policy also has been conservative--somewhat more so than Alliance Resource Partners, which we've recommended as a High Energy Energy List pick.
4:26
That said, there's no evidence to date that US steel manufacturers are doing anything now other than taking advantage of the higher tariff to raise prices. And met coal companies tend to be affected heavily by the health of the economy. I would rate METC hold as higher yielding ARLP is.
Andy
4:32
Hi Roger and Elliott - Thanks as always for these chats. I have a few questions, but I'll send them in separately.

Recently you removed National Space (NSA) and added Extra Space (EXR) to the Reit Sheet recommended list. CUBE is still on the list - Do you have a preference between CUBE and EXR?  EXR hasn't raised it's Div recently, where CUBE has. Is one materially more expensive than the other?
AvatarRoger Conrad
4:32
Hi Andy. I swapped them primarily because Extra Space's operating metrics are consistently superior to National Space's in the self storage business. And while we have not seen NSA's Q1 numbers and updated guidance )May 5), Extra Space has again reported very strong numbers--including rising same space revenue. while staying on track with cost synergies from recent acquisitions. I'm basically a lot more comfortable holding it than NSA. CubeSmart actually reports numbers tomorrow. I expect them to support the dividend--not as strong as EXR's but enough to continue holding the stock with a yield north of 5%.
Jack A.
4:34
Hi Elliott:  What are your thoughts about Cheniere Energy Partners as an investment ging forward?
AvatarElliott Gue
4:34
In my view, natural gas is a more economically resilient commodity story than oil. LNG is also 95% contracted for 2025 and into 2026. So, I like LNG. I do think there's more upside in some of the natural gas E&P names like EXE, which is still not getting enough credit for their free cash flow profile at $4/MMBtu gas. As for CQP -- LNG's MLP -- they're part of the Sabine Pass project but nor Corpus Christi. So, I think CQP might not have as attractive growth prospects as LNG unless or until LNG goes ahead with additional expansions at Sabine Pass.
Andy
4:36
What are you thoughts about Plains All American as a buyout candidate? They seem really cheap given their debt levels are among the lowest in their peer group and they cover their dividend (that they've been raising) really well. Their market cap is relatively small (about what Magellan was before OKE bought them.) It seems the stars are there for PAA to get bought out. Its also - still - the most below your buy under price of all the midstreams - by quite a bit.
AvatarRoger Conrad
4:36
I've thought Plains is a good candidate for midstream M&A for some time. They continue to reduce debt and I think if they stay independent they'll eventually restore the dividend back to where it was at the top of the previous cycle, which is still about twice the current level.

That said, I can only guess when there might actually be a takeover offer for Plains--which by the way would have to include Plains GP Holdings as the primary shareholder of PAA. But the stock is cheap, risk is dropping and the yield is high and growing rapidly--which rewards our wait.
Andy
4:46
I know you've covered AES in the chat, but I have a slightly different question. I thought I read that AES has said they were NOT going to raise the dividend for the foreseeable future to focus on debt reduction. Now I can't find where I read that. It kind of makes sense as they are really working hard to get an investment grade credit rating, and their yield is about the highest (if not the highest) in their peer group - and it is NOT earning them any love. But you referred to it as still growing. Did I just imagine they said they were going to pause increases?
AvatarRoger Conrad
4:46
Back in February when AES announced Q4 earnings, raised the dividend 2% and affirmed expected earnings guidance, management also announced what it called a "harvesting" strategy  that would focus on increasing free cash flow to cut debt and eliminating the need to issue stock. Key elements included meaningful additional cuts to debt (most AES debt is at project or subsidiary rather than the parent level), paring back higher risk operations (exiting Brazil) and reducing CAPEX and operating costs. I expect we'll hear more about that when the company releases Q1 results, expected sometime in the next week.

Part of that strategy does appear to include holding the dividend at the current level in 2026 and 2027--or at most modest increases. But AES does already have investment grade ratings at the parent level.

Completely agree AES isn't getting much love now--I think that's because of concerns about debt, emerging market exposure remaining and renewable energy generation under construction.
AvatarRoger Conrad
4:47
That's a cloud hanging over the stock. But again at a yield of 7% and at 4X earnings more or less, this is a very cheap stock--especially if it can stick to guidance as I still expect it will.
jerrypjenkins@aol.com
4:52
Roger, what happened to Chesapeak (CHK)? I owned a few hundred shares and it no longer shows up in my Schwab account?  As always thanks to you and Elliot for these chats.
AvatarElliott Gue
4:52
Chesapeake acquired Southwestern Energy last October and simultaneously changed the name of the combined company to Expand Energy (EXE). We still recommend expand energy in EIA.
Andy
4:54
Last one from me. Clearway and BEP are the 'last two standing' in the pure play renewable space. I have a preference for CWEN because BEP has to be pay considerable fees to BN/BAM the bigger it gets. I'm sitting on fairly good size gain in CWEN, (less, but still nice gain on BEP.) With the self destruction of NEP (Or whatever they're calling themselves now) and Atlantic getting bought out far below where it had been, I worry CWEN might be next. (BEP feels safer because BN/BAM gets fees based on AUM, so I don't think they'll kill the golden goose) Just want your thoughts on why CWEN is still going when all the others are gone and if we have to worry about a NEP type implosion.
AvatarRoger Conrad
4:54
Clearway actually has natural gas generation in California and Brookfield is a global nuclear power players with 50% of Westinghouse. But contracted renewable energy is still the primary business focus of both.

NextEra Energy Partners/XPLR Infrastructure is where it is basically because of financing asset purchases with convertible equity preferred financing (CEPFs). When the stock started dropping and interest rates began rising, it became impossible to refinance at economic rates. So what primary owner NextEra Energy has done is take that off the table by eliminating the dividend and using that money to pay off the CEPFs with operating cash flow--which is basically locked in with long-term contracts. We'll see how well that's working when XPLR announces Q1 results and updates guidance, probably next week. But it looks like it will eventually recover.

Clearway's primary shareholder Clearway Group is 50% owned by TotalEnergies and Blackrock/Global Infrastructure Partners. And they've been financing
Jack A.
4:57
Hi Elliott:  With the pullback in energy stocks, what is your favorite pipeline company to add to a position in at today's prices?  Thanks.
AvatarElliott Gue
4:57
I think it's tough to go wrong with ET here. Lots of expansion opportunities in NGLs and natural gas pipelines, particularly as it regards moving Permian gas production out of the basin and to utilities in the Southeast/LNG export opportunities.
AvatarRoger Conrad
4:59
Continuing with Clearway--they've been financing with operating cash flow all along. That's not to say TotalEnergies and Blackrock might not want to take it private eventually, if they see no benefit to growth from having publicly listed stock. But there's no indication in Q1 results release today that's teir intention. In fact, everything looks pretty much on track with the quarterly dividend raised 1.7% sequentially, EBITDA up 19.4% and CAFD up 48.1%. Renewables and storage generation are up 13.1% on strong asset performance and asset additions, and natural gas availability was up to 89.3%.
5:00
As for Brookfield, they're expected to announce the next few days. They're run more aggressively. But Brookfield the parent has done well with the model of essentially using BEP/BEPC as public funding for its renewable energy assets. And given its growth plans, I don't anticipate any change in that.
5:02
One more point on renewable energy as a business, one thing we've seen the past few years is the value of scale. Demand is still very robust--NEE had another $3 bil plus quarter for new orders. But being able to compete in an environment of higher for longer interest rates, tariffs and uncertainty about tax credits depends on scale. Atlantica didn't have it. CWEN and BEP especially do increasingly. I'm comfortable holding both.
Willy
5:08
Roger, in listening to the Edison earnings call today, I was left with the impression that unless proven otherwise, the Eaton fire will be attributed to Edison’s dormant power line. Do they have to prove their innocence? What’s your take?
AvatarRoger Conrad
5:08
Hi Willy. What they actually said was that while there was no conclusive evidence the dormant power line was the cause of the fire, neither was there any other explanation that has emerged. And since we're talking about California and the foggy world of wildfire litigation, they believe its probable they will be viewed as guilty until proven innocent.

What this means is there will likely be payouts. What we don't know is how much they'll be and how much Edison would have to cover. We do know their max liability is around $4 bil by law--and that amount would seem to be more than reflected in the drop in the stock year to date (-30% roughly). They'll only owe that if the state deems their actions as negligent--and there are grounds for a solid defense. Bottom line: I appreciate the acknowledgement of risk. But this is not a repeat of Hawaiian Electric or PG&E in the previous decade.
AvatarRoger Conrad
5:13
I have answers to a few questions emailed by Dan N earlier: Q. How does Cemig's (NYSE: CIG) dividend policy work? A. They pay a regular quarterly dividend supplemented by special payouts. It's closely linked to cash flow and therefore variable. The amount in USD is also affected by the exchange rate between the Brazilian Real and US dollar. I have not found a good way to anticipate what the exact dollar amount of dividends will be. But the company has been executing lately very well on investment plans. So I would expect generous payouts this year--barring a crash in the Real and severe global recession.
5:16
Also from Dan N: Q. What does AES mean when it says it's harvesting its free cash flow? A. Basically, as I responded in an earlier question, it means they're cutting operating costs and CAPEX so they can devote more money to cutting debt faster. I would point out they still have a pretty robust CAPEX budget and they did not change their expected growth rate--rather increased their expected EBITDA growth rate in February in response to the policy. In any case, we should have an update in the next few days when they release Q1 results.
5:19
A third from Dan N--Q. You've hinted at adding another renewable energy company to the CUI portfolio in May. Can you tell us which one now? A. No, I have not yet fully decided whether to add anything at this time, let alone made a specific choice. I may still add. But in the meantime, there's already a lot to choose from in the space with BEP, CWEN and NEE.
5:21
Fourth from Dan N. Q. Should we still see Edison International as a bargain after today's news? A. Yes, with the caveats I've laid out answering questions on the company in this chat--mainly that the wildfire concerns are likely to hang over the stock until there's more clarity on liability--and that may not happen until late 2025, or even later.
Ron
5:21
Elliott or Roger. Based on the GDP contraction and economic uncertainty how far do you see oil falling and what implications on the EIA portfolio. More buying opportunities to come ?
AvatarElliott Gue
5:21
GDP contraction is mainly a function of trade and, specifically, a surge in imports ahead of tariffs. We're already hearing from the Port of Los Angeles and others that import traffic into the West Coast (sensitive to China) is collapsing. Ironically, that will actually reverse the weakness we saw in Q1 GDP as a drop in imports, which plugs directly into the calculation (net trade = exports less imports). More broadly, I see 50/50 probability of recession. We've seen weakness in soft data (survey-based series like ISM) but that's not yet spread to the hard data (I.E. payrolls). Given the experience of 2022 where soft survey data never translated to real weakness, we'll need to see more signs of softness to call recession. Re: Oil. The decline in oil prices since 2022 is already consistent with the typical decline we see during a mild-to-moderate recession. The longer oil prices stay below $70/bbl, the faster US shale supply will fall. I also suspect  dip towards $50/bbl would prompt an immediate response
AvatarElliott Gue
5:21
from OPEC+. As for the stocks in EIA, most are already pricing in lower oil prices. I suspect a dip to the low $50's could catalyze a bit more downside in oil-levered names -- perhaps 10% to 20% depending on the name. However, I'd note that some bigger names like XOM have stopped falling with oil.  My view is also natgas remains more resilient as the story is driven by export capacity and more recession-resistant electricity demand.
Gary Simmons
5:24
The refining sector, VLO, PSX and etc are not taking off yet.  I would expect that the fear of recession will have to pass before they cath a significant bid.  What are your thoughts on timing to purchase refiners?
AvatarElliott Gue
5:24
The refiners will need to see some sign of demand recovery to "work," particularly from Asia/China. Remember, refiners are the only major energy group that has no positive upside leverage to oil -- it's all about demand for refined products. I suspect that the big catalyst will be some sign that China is stimulating growth and it's starting to get some traction. At this point, I do think there's limited risk in high-quality names like VLO as they're already pricing in recession.
AvatarRoger Conrad
5:27
Number five from Dan N. Q. Potential risk to Dominion Energy (NYSE: D) and EverSource (NYSE: ES) from the Trump Administration pulling permits on a New York offshore wind facility already well under construction? A. As I indicated answering another pre-chat question, I think there's a very real risk this decision sets a precedent that could threaten every energy infrastructure asset in the US--for example, a future anti-fossil fuels White House pulling the plug on an operating pipeline, as seemed possible for Dakota Access early in the Biden Administration. I think the move against the Equinor project is likely to be challenged in court. And like other executive orders it's likely to be rejected by the court. But if it stands, it will raise the bar for projects in the US regardless of energy source--developers will demand a premium to invest, which will likely include higher prices and more guarantees to be essentially borne by customers.
5:32
As for the Dominion project, it has strong support of Virginia's Republican governor and AG after an agreement hammered out early in their current term. And should the permit be pulled, ratepayers would still be on the hook for the cost incurred--without the badly needed output from the plant. I'm looking forward to what the company has to say the next in the next few days when it reports Q1 results and updates guidance. But I would be very surprised if this plant doesn't enter service in late 2026 as projected. EverSource  will also update its situation in the next few days. But the Orsted facility also looks likely to enter service.
5:39
Number six from Dan N. Q. Is the announcement Westinghouse will build a new nuclear reactor in Poland the first firm commitment? A. No, there are multiple new nuclear plants being built around the world at this time, including a fleet of 10 announced this week in China. It is potentially a big deal for Westinghouse and by extension its owners Cameco and Brookfield, and could be the first of several. But just like the India operations, I would not expect BEP to comment until there's something meaningful to report. Number seven from Dan N. Q. Is Energy Transfer LP due for another acquisition? Does the fact that MLPs have lagged C-Corps this year impact their ability to compete for deals versus the likes of ONEOK? A. I think it has but now that C-Corps have pulled back it's less of a disadvantage. ET though is also focused on its Permian venture with its affiliate and possible next target Sunoco LP. so it may wait. We'll get a good idea May 6 when the company reports Q1 numbers.
5:43
Number 8 and last from Dan N--Q. What are your thoughts about the 2 and 5-year prospects for Fluence Energy? A. I'm both interested and a little wary of what battery storage company Fluence will report for Q1 results and guidance on May 7. Mainly, Q4 results showed pretty clearly that sales and orders are going to be highly volatile from quarter to quarter--and that will greatly affect profitability. I do think the stock has dropped about as much as it will barring a Chapter 11 filing, which I don't think we can rule out entirely but that seems unlikely at this time. Any sign of stabilization should squeeze the shorts and push the stock higher. But no one should own this one unless they can deal with the fact it might go to zero--as much at it could easily go 5X in the next two years if things go right.
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