America’s largest college mutual fund VA529 owns Spectra Energy, a stranded investment

Parents and grandparents buy 529 college savings plans as safe investments, so VA529 chose poorly in Spectra Energy, the very risky company behind the Sabal Trail fracked methane pipeline now plowing through the Floridan Aquifer drinking water of south Alabama, Georgia, and all of Florida and under the Withlacoochee and Suwannee Rivers against growing opposition. Maybe you’d like to mention that to Mary G. Morris, the Chief Executive Officer of Virginia529 College Savings Plan, the biggest mutual fund investor in both Spectra Energy and in Enbridge, which is buying Spectra. There’s a handy VA529 contact form or you can call or write:

Toll-Free: 1-888-567-0540
9001 Arboretum Parkway
North Chesterfield, VA 23236

Spectra is so risky it just sold itself so Enbridge would take on about $22 billion of Spectra debt. Debt especially racked up since natural gas prices tanked in 2014.

Enbridge is one of the two pipeline companies behind the Dakota Access Pipeline (DAPL) that was just defeated at least temporarily by thousands of native Americans and supporters including U.S. military veterans. Even Forbes says DAPL, like the failed Keystone XL Pipeline before it, is likely to become a stranded investment. It’s not good press when a company uses pepper spray, dogs, and fire hoses in sub-freezing temperatures on unarmed water protectors, and shoots a college-age protector who may lose her arm.

And there’s even a specific report about DAPL as a stranded asset. Cathy Kunkel and Clark Williams-Derry, Institute for Energy Economics (IEEFA), November 2016, The High-Risk Financing Behind the Dakota Access Pipeline: A Potential Stranded Asset in the Bakken Region of North Dakota,

DAPL faces a looming financial deadline. The pipeline’s principal backer, Energy Transfer Partners (ETP), has conceded in court proceedings that it has a contractual obligation to complete the project by January 1, 2017. If it misses this deadline, companies that have committed long-term to ship oil through the pipeline at 2014 prices have the right to rescind those commitments—and may well exercise that right.

Spectra Energy’s Sabal Trail fracked methane pipeline through Alabama, Georgia, and Florida also faces widespread and growing opposition. Sabal Trail also faces a looming in-service deadline of May 2017, which has already slipped to June. And Sabal Trail, like DAPL, is being funded by borrowed money: the ratepayers of Florida Power and Light can’t possibly already have paid in the $3 billion for that boondoggle.

The Conclusion of the IEEFA report could just as easily have been written about Sabal Trail:

The rush to build the controversial Dakota Access Pipeline stems largely from the financial motivations of Energy Transfer Partners, motivations that do not necessarily coincide with the interests of Bakken oil drillers or with any economic rationale for increased regional pipeline capacity. The contracts for DAPL were signed in a radically different economic environment in which Bakken oil production was growing and drilling companies were doing well financially. The DAPL is a superfluous project being built to preserve the favorable contract terms that its developers negotiated in 2014.

Back in 2013, FPL’s excuse for Sabal Trail was Florida needed 13% more new electricity in the next decade. But this year, FPL admitted in boldface in the executive summary of its 2016 Ten Year Plan:

“Difference: FPL does not project a significant long-term additional resource need until the years 2024 and 2025.”

So Sabal Trail, like DAPL, “a superfluous project being built to preserve the favorable contract terms that its developers negotiated in” a by-gone year. IEEFA carried an article spelling this out. Gillian Neimark for Southeast Energy News, IEEFA, 14 November 2016, Pipeline Glut in Southeast U.S.,

While the shale boom has seen a proliferation of new natural gas pipelines throughout the Southeast, critics say many of the projects are not needed and are simply a way for developers and utilities to reap profits on the backs of ratepayers.

Even if Sabal Trail ever starts shipping fracked methane, it will still be a stranded asset now that the people of Florida defeated the fossil-fuel-funded fake Amendment 1 and SolarCity, the largest U.S. solar panel installer, is starting operations in Florida.

Don Pittis, CBC News, 8 April 2016, Analysis: Warning for investors, not just environmentalists, in fossil fuel spending; What if pipelines, oilsands and power plants don’t last long enough to pay off?

It is no surprise when committed environmentalists scoff at new investments in pipelines and oilsands. But a new study indicates that self-interested investors should also be wary.

As the Canadian Association of Petroleum Producers announces a $50 billion drop in Canadian oil and gas investment, the new research raises concerns about the valuation of any future investments, saying they may not last long enough to pay off.

This could help explain why Canadian tar sands pipeline company Enbridge is desperately seeking to remodel itself by buying Spectra.

The report, published in the academic journal Applied Energy, does not focus directly on pipelines or oilsands development. Instead, it addresses electrical power plants driven by fossil fuels.

Extending stranded assets

The innovation of the report, however, is to extend the concept of “stranded assets” beyond fossil fuels still in the ground. It says they now include the plant and equipment used to turn those resources into energy used by our economy.

Plant and equipment like pipelines, compressor stations just like Sabal Trail is gouging through the southeast U.S., and power plants, just like FPL and Duke are building in Florida.

We’ve seen the top institutional investors in all three Sabal Trail partners (Spectra Energy, NextEra Energy, and Duke Energy) include Bank of America of Charlotte, NC with offices everywhere, State Street Corp. of Boston, MA, and the most invested of all, Vanguard Group of Malvern, Pennsylvania with offices worldwide. Short-term profit is what they do.

But Vanguard, for example, knows solar profit, too, being the second-largest institutional stockholder and the largest mutual fund stockholder in First Solar (FSLR) and the second-largest in both categories in SolarCity (SCTY). Vanguard is also number 4 in both cagegories in SCTY’s new owner, Tesla (TSLA). State Street is smart enough to be in all three of FSLR, SCTY, and TSLA, but Bank of America doesn’t show up in the top 20 shareholders of any of them.

And who’s the biggest mutual fund investor in Spectra Energy? VA CollegeAmerica Inc Fund of Amer 529E, plus #5 VA CollegeAmerica Cap Inc Bldr 529E, with farther down VA CollegeAmerica Amercn Mutual 529E, VA CollegeAmerica Cap World G/I 529E, VA CollegeAmerica Cap World G/I 529E, and VA CollegeAmerica Invmt Co of Amer 529E, not much changed since I looked into this last year. VA529 is almost as overinvested in Duke Energy, another Sabal Trail partner. And VA 529 is even more overinvested in Enbridge, which is buying Spectra.

VA529, however, does not show up in the top 20 of any of FSLR, SCTY, or TSLA. Maybe you’d like to suggest to VA529 CEO Mary G. Morris that she change that.

Or mention it to VA529’s board, which has an Investment Advisory Committee meeting and a board meeting coming up Thursday morning December 8th 2016:

All meetings held in the Board Room at the Virginia529 College Savings Plan’s office at 9001 Arboretum Parkway, North Chesterfield, VA 23236 unless otherwise noted.

Public comment accepted at the beginning of all meetings.

It’s an easy path to follow. According to Bloomberg, solar and wind power are already getting twice the investment of gas and coal. Solar power will win like the Internet did.

Divest Spectra, Enbridge, and Duke.

Let the sun rise.


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