|
April 10, 2001
Do You Own Nuclear Power Stock?
Well-known conventional mutual funds and asset managers are looking to catch profits from nuclear
power’s revival.
SocialFunds.com --
Just when you thought nuclear power was going out for the count, deregulation, global warming fears
and ever-increasing demand are bringing nuclear power back into the limelight. Many observers of
California’s rolling blackouts are beginning to consider nuclear power as one of the viable
answers to the nation’s energy problems.
 Over the past few years there have been two companies
snapping up nuclear power plants across the U.S. One is "Entergy (ticker: ETR), a global energy
company based in New Orleans with power production, distribution operations, and related
diversified services. It currently operates eight nuclear units at seven sites in the southern and
northeastern regions of the U.S.
The other is Amergen, which is a joint venture between
British Energy PLC (BGY) and Exelon (EXC). Exelon is the product of a 1999 merger between the
Philadelphia Electric Company (PECO) and Unicom. Exelon is one of the nation's largest electric
utilities and is now the largest nuclear operator in the United States. With 14 reactors from the
PECO-Unicom merger and the six reactors purchased since by Amergen, Exelon has a stake in 20
reactors, which is nearly 20 percent of U.S. nuclear power generating capacity.
Many
social investors screen out nuclear power because they believe the potential of another Chernobyl
overshadows any benefit of cheap electricity. It seems that the general investing public, however,
does not have qualms if the companies can return a profit. With mergers and so many nuclear plants
changing hands recently, it is worthwhile to check briefly who owns a piece of Entergy and Exelon.
The mutual fund that likes Entergy the most is Vanguard’s Windsor-II Fund (ticker:
VWNFX). Windsor-II, a large-cap value fund, has committed 2.58 percent of its portfolio to
Entergy. Its 16.3 million shares translate to a market value of over $632 million dollars (all
figures in this article for shares owned, market value of shares and percent of portfolio are taken
from reports dating between 1/31/00 and 12/31/00).
The Vanguard 500 Index Fund (VFIAX),
the largest mutual fund in the U.S. in terms of asset size, owns sizable chunks of both Entergy and
Exelon. This is by default, as the premise of this passively managed fund is to mirror the S&P
500’s price and yield results. The Vanguard Wellington Fund (VWELX) also has Exelon in its
portfolio, with its 2.6 million shares valued at around $172 million.
American Funds Group
likes the prospects of Exelon enough to have one of its funds be the top mutual fund investor. The
Income Fund of America (AMECX) has devoted 1.47 percent of its portfolio to Exelon, with its 4.5
million shares worth approximately $293 million.
The Vanguard Group, Fidelity Management &
Research Company, Barclays Global Investors, N.A., State Street Global Advisors and Brandes
Investment Partners LP stood out as asset managers that were among the top 15 institutional
investors in both Entergy and Exelon.
Through advances and improvements, nuclear power
plants can be run at a much higher efficiency now than when they were built twenty or thirty years
ago. The potential for human error, however, has not changed; in fact, competitive pressure from
deregulation may increase that possibility.
According to the Nuclear Information and
Resource Service & World Information Service on Energy (NIRS/WISE), British Energy, one of the
owners of Amgen, may be putting the bottom line ahead of safety. After becoming a private company
in 1996, British Energy implemented the cost-cutting measure of laying off workers and replacing
them with contractors. In 1999 report, the British regulatory agency Nuclear Installations
Inspectorate (NII) wrote that at one of the prime contractors, “not all of the partnership
staff…are fully qualified or experienced to perform necessary analyses, nor are they fully
familiar with the nuclear plants they are expected to undertake work on.”
The other
half of Amergen has a spotted history also. PECO, which is now part of Exelon, was a recipient of
one of the highest nuclear-related fines in U.S. history. It was assessed the penalty when
operators at its Peach Bottom nuclear complex were found sleeping and playing computer games on the
job.
With more plants being concentrated in fewer hands, nuclear power will be easier for
social investors and anti-nuclear activists to monitor. But everyone should be thinking twice
about the wisdom of putting market competition pressure on nuclear generating facilities. The
consequences of cutting too many corners could be grave indeed.
©
SRI World Group, Inc. All Rights Reserved.
Top
| 
