Two companies that could feel the pain in the wake of the disaster in Japan are nuclear firms Entergy ans SCANA, according to Bank of America Merrill Lynch’s Steve Fleishman.
Entergy and SCANA both have exposure to the political risks that will now envelop the nuclear industry, and BoA ML have downgraded both as a result.
From Steve Fleishman (emphasis ours):
We are downgrading Entergy (ETR, B-3-7, $73.69) and SCANA (SCG, B-3-7, $40.02) from Neutral to Underperform and cutting price objectives for ETR from US$78 to US$74 and for SGC from US$40 to US$38, due to increased uncertainty of nuclear approvals critical to long-term earnings. ETR is seeking relicensing of several of its nuclear units in VT and NY over the next few years. The nuclear crisis in Japan could impact the approval process, which has already seen significant political pushback in both states. SCG has a meaningful amount of its earnings growth tied to nuclear through its 55% share of two new 1,117MW units, comprising over half of its planned capex through 2013 and almost all of its earnings growth over the next five years. The two units are expected to be online in 2016 and 2019. The events in Japan might raise project costs, push back the construction timeline, or delay the review process of SCG’s combined construction and operating licence applications at the Nuclear Regulatory Commission (NRC), which are expected in late 2011 or early 2012.
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