Why President Trump Could Be Great for Energy

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Oil & Gas

Last week, Trump became the president-elect. As you probably remember, he talked a lot about energy during his campaign.

Remember those “Trump Digs Coal” signs? It turns out his promise to revive the coal industry may be one he can’t keep. I’ll talk more about that in a moment.

He’s also not as anti-renewables as everyone thinks. At this point, he doesn’t have any plans to revoke renewable energy tax credits. In fact, now that he’s been elected, he’s staying mum on all things energy.

The real question is…

What’s the best way to play energy now that we know who’s going to be sitting in the Oval Office in January? I think I have a good idea.

Actually, I have several of them. Let’s look at some of the energy sector fallout from the election and where we go from here.

Last Wednesday, solar energy companies like Vivint Solar Inc. (NYSE: VSLR), SunPower Corp. (Nasdaq: SPWR) and SolarCity Corp. (Nasdaq: SCTY) all dove south. So did shares of wind turbine maker Vestas Wind Systems (OTC: VWDRY).

On the other side of the coin, shares of coal producer Peabody Energy Corp. (OTC: BTUUQ) jumped 50%.

But the truth is, the movements of these companies don’t actually reflect the Trump energy plan.

In fact, according to a member of Trump’s transition team, energy isn’t even on Trump’s initial radar screen. It turns out his top five 100-day agenda items are…

  • Tax reform
  • Infrastructure improvements
  • Trade deal renegotiations
  • Immigration
  • And the reworking of Obamacare.

The production tax credit for wind power also phases out by 2020. So wind farm developers have plenty of incentives to close financing on deals quickly.

The bottom line is the current pullbacks in solar and wind companies are buying opportunities, especially SunPower and Vestas. Both are well-run companies in solar and wind, respectively.

Another opportunity? My longtime readers know I’m a big fan of master limited partnerships. They afford investors a great way to invest in oil and natural gas pipeline infrastructure.

I like them because they pay out most of their earnings in the form of big fat dividends. Under Trump, I expect fast tracking for pipeline projects the Obama administration has been dragging its feet on.

With an all-Republican House, Senate and now president, the logjam of energy legislation and projects could get unstuck. After all, pipelines are energy infrastructure, and that’s one of Trump’s top five items.

In addition, the scope of MLP investments may widen. Under current law, MLPs are restricted to oil and gas properties and assets. However, the Master Limited Partnerships Parity Act – introduced to Congress in June 2015 – aims to extend MLPs to include renewable resources, carbon capture, energy storage and energy storage technologies.

And what about bringing back coal mining jobs? It turns out Trump may have oversold himself on that promise. Utilities aren’t switching away from coal plants solely due to tight emissions regulations. Natural gas is so cheap, coal just doesn’t make economic sense anymore.

And natural gas prices are likely to stay low for some time to come. Under Trump, we can expect the removal of regulatory muckity-muck. This will lead to even more fracking, especially on federal lands. That means even more pipelines and natural gas-fired power plants.

Even though last Tuesday’s results were a surprise to 50% of American voters, energy stands to benefit in a “bigly” way.

Good investing,

Dave