US utilities to benefit from data center demand in the second half
After striking several supply agreements during the second quarter of 2018, U.S. Electric utilities were bullish about the demand for data centers that are driving the artificial intelligence boom. This reinforced market expectations regarding sales growth throughout the year.
Several top utilities, such as American Electric Power, NextEra Energy and others, have signed contracts during the recent quarter, while other companies have expressed interest in technology.
Timothy Winter, Gabelli Funds portfolio manager said: "We began to see some clarity regarding data center opportunities. The numbers are staggering." It owned stakes in six utilities, including PG&E Corporation, NextEra Energy, and AES Corp. as of March 31.
Ben Levitt is the associate director for power and renewables at S&P Global Commodity Insights. He said that since the beginning of the year, U.S. utilities have increased their guidance on the cumulative demand of data centers in 2030 by about 50%.
Data centers make up about 25% of the economic development pipeline that we shared for 2028. On a Duke Energy post-earnings conference call, CEO Lynn Good stated that this 25% will grow as we move into 2030 and beyond.
Analysts have stated that utilities could experience meaningful growth in sales and are well-positioned to achieve or exceed their long-term targets following two years of poor performance.
LSEG data revealed that utilities are expected to earn 12.4% more than the S&P 500 for the entire year.
Analysts expect utilities to update their capital expenditure plans and base rate cases, a regulatory process that is required to raise service charges, to help finance upgrades to energy infrastructure.
Nicholas Campanella is the head of U.S. Power and Utilities Research at Barclays.
The third quarter could also see a rise in profits due to higher temperatures.
Analysts said utilities should perform better than other sectors, even if there is a recession. However, the impact of U.S. election results remains uncertain.
(source: Reuters)
