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Author: jandctl One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 220  
Subject: Re: Lowered 2012 Estimates Date: 8/22/2012 2:21 PM
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I agree. It may not happen next year but EXC will be increasing its eps and its earnings per share. I see little downside from the interest rate or synergy risks you mention, but my primary difference is on the outlook for natural gas prices.

My opinion is that they will not only be up in 2014 but will be up next year. They went down fast and they are going to go up fast. Just last August natural gas was at $4.31/mcf. Six months later it was under $2.

The EIA reported last month for the first time ever natural gas-fired power plants generated more electricity than coal-fired plants. Both are now at 32% of US power generation. This is a huge change. US Electricity Production -2010 from Wikipedia was:
Coal 1847 bWh 44.5% of capacity
N Gas 999 bWh 24.1% “
Nuclear 807 bWh 19.4% “
Hydro 255 bWh 6.1% “

The CEO of Ultra Petroleum, Mike Watford sees $4 gas in 2013 and $5 gas in 2014. His company sold half its 2011 production at $5.84/mcf. We soon forget the - in this case very recent - past.

For some very long-dated perspective let me share some 2003 and 2005 data. From Jan 10,2005 Forbes Magazine (excuse thd clipped format).
.."EXC one of Best Managed Companies. 30K megawatts to 5.1 million customers midwest is 70% produced by nuclear. 17 reactors produce power at 50% savings over gas-fired plants. EPS has grown 87% since last year. Member of NuStart, an industry consortium to build series of new reactors over next decade. RISKS: Needs 1) federal aid for new reactor construction and 2) a 'yes' on repository at Yucca..."

From February 17, 2003 Forbes Magazine:
..."coal and nuclear generators yes, gas generators no. Because gas supply will be constrained and GAS-FIRED electricity 2-4 TIMES MORE EXPENSIVE than coal or nuclear

Demand for the gas is accelerating faster than widely believed. Supply from the unconventionals is likewise overestimated. The supply side projections on cost and importantly, operating life of the shale wells are going to prove optimistic.
-jandctl
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