Finance

• Barrick Gold shows strong financial performance, solid revenue growth, and a healthy financial position.
• Gold prices are currently high, driven by investor demand and central bank purchases, creating a favorable environment for gold mining companies.
• Despite positive factors, volatility in the gold market and Barrick Gold’s share price require investors to assess their risk tolerance and employ appropriate investment strategies.

With prices reaching a new peak of $2,653.98 per troy ounce, marking a significant year-to-date surge of 28.71%, investors understandably turn their attention to the gold market and the companies poised to benefit from this upward trend. As a traditional safe haven investment, gold often attracts investors seeking to hedge against inflation and economic uncertainty.

The current surge in demand, driven by central banks and investors seeking portfolio diversification, has further fueled interest in this sector. Barrick Gold (NYSE:), a leading gold mining company, is at the forefront of this industry, presenting a compelling investment opportunity for those seeking exposure to the precious metal.

Strong Financials, A Steady Foundation

Barrick Gold’s financial performance underscores its solid standing in the gold mining industry. The company recently reported a 20.11% increase in quarterly revenue compared to the same period last year, signaling strong growth and financial health. This financial performance, coupled with a significant market capitalization of around $36 billion, positions Barrick Gold favorably to capitalize on the positive trends in the gold market.

Furthermore, Barrick Gold’s debt-to-equity ratio (D/E), currently at a healthy 0.15, demonstrates responsible debt management, a key factor for investors concerned about financial risk. This strong financial foundation creates a solid base for potential future growth and makes Barrick Gold a more attractive investment for those seeking exposure to the gold market.

A Look at Barrick Gold’s Share Price

Despite the recent surge in gold prices, the gold market remains inherently volatile, which presents opportunities and challenges for investors in gold mining companies like Barrick Gold. While the recent 52-week high of $21.21 reflects a favorable period for the stock, it has also dipped to a low of $13.76, showcasing the potential for significant fluctuations. Barrick Gold’s share price has shown resilience, with a one-year performance of +39.79% and a year-to-date gain of +12.44%.

For investors considering Barrick Gold, this volatility necessitates carefully assessing their risk tolerance and investment goals. While the company’s solid financials and the favorable gold market present opportunities, price fluctuations in Barrick Gold’s stock price underscore the importance of a long-term perspective and a thorough understanding of the potential risks.

While Barrick Gold’s share price has demonstrated resilience, the short-term fluctuations highlight the need for a disciplined investment approach, potentially using strategies like dollar-cost averaging or focusing on longer-term holding periods.

Central Banks Fuel a Gold Rush, Boosting Barrick Gold’s Prospects

The gold market is experiencing increased demand from investors seeking portfolio diversification and a safe haven asset, and there is a significant appetite for gold among central banks. This trend, mainly driven by China, is a key factor fueling the strength of the gold market.

In 2023 alone, China purchased 1,037 tonnes of gold, a substantial amount, further solidifying its position as the world’s largest gold holder. The first quarter of 2024 saw even more aggressive buying by central banks, marking the fourth-strongest quarter of purchases since 2022.

This growing demand from central banks underscores the increasing perception of gold as a safe haven asset, a trend that could continue to drive gold prices higher in the coming months and years. This surge in demand, combined with the existing strong appetite from investors, creates a favorable backdrop for gold mining companies like Barrick Gold.

As a leading gold producer with a solid financial foundation and ambitious growth strategies, Barrick Gold is well-positioned to capitalize on this trend, potentially benefiting from higher gold prices and increasing investor interest.

A Growth Trajectory: Expansion and Sustainability

Barrick Gold is focused on maximizing its current performance and actively investing in its future growth through strategic expansion projects and a commitment to sustainable mining practices. This dual focus strengthens the company’s appeal to investors seeking long-term value and a responsible approach to mining.

The company is pursuing several significant projects designed to increase production capacity significantly. These include the Goldrush mine in Nevada, projected to reach an annual output of over 400,000 ounces by 2028, and the Fourmile project, which has the potential for annual production in excess of 500,000 ounces over two decades. These expansion efforts showcase Barrick Gold’s commitment to future growth, potentially leading to higher production levels and increased profitability.

Barrick Gold’s dedication to sustainable mining practices further solidifies its commitment to responsible operations.

The company has developed an innovative biodiversity tool designed to assess its impact on biodiversity across its operations. This tool provides tangible metrics that inform actionable conservation strategies and helps Barrick Gold measure its performance against concrete goals.

This proactive approach, combined with the company’s commitment to local communities and economic development, reinforces its image as a responsible and forward-thinking company.

A Balanced Perspective: Time to Buy?

Barrick Gold presents a compelling opportunity for those seeking exposure to the gold market. The company’s strong financial foundation and commitment to growth and sustainability position it favorably to capitalize on the strong global demand for gold. The positive trends in the gold market, fueled by factors like central bank purchases and increasing investor interest, are creating a favorable environment for gold mining companies like Barrick Gold.

Considering Barrick Gold’s current position, strategies like dollar-cost averaging or focusing on long-term holding periods could be considered. Ultimately, Barrick Gold offers a solid investment opportunity with potential for growth and long-term value for those seeking exposure to the gold market.

Original Post

With vehicle thefts gradually decelerating in Canada, insurance claims and costs are also on the decline.

New data by the Insurance Bureau of Canada released Wednesday showed that in the first six months of the year, there were 17,647 insurance claims for auto theft, a 19 per cent decrease when compared with 2023.

Across the country, car theft claims from January until June amounted to more than $544 million, down by roughly 29 per cent relative to the same period last year.

This comes as the number of vehicle thefts dropped by 17 per cent in the first half of the year, according to a previous report by the non-profit Équité Association.

Increased investments, public awareness and information-sharing have helped reverse the trend of auto theft, according to Équité.

“Concerted actions by law enforcement, insurers, governments and drivers to combat theft are showing results, but more remains to be done,” said Liam McGuinty, vice-president of strategy at IBC, in a statement.

2:29
Auto theft report warns of increase in violence, organized crime involvement

Despite the dip seen this year, auto theft claims and counts still remain above “historical levels,” IBC reported.

In the last 10 years, auto theft claims have gone up by 138 per cent and the value of those claims has surged by 442 per cent.

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McGuinty said this is putting upward pressure on drivers’ insurance premiums, while also compromising public safety.

“While theft frequency dropped slightly in the first six months of 2024, the problem remains significantly above historical trends,” he added.

As the issue persists, experts say that drivers are likely to continue feeling the pinch on their insurance premiums.

In a Ratehub.ca survey in May, nearly half (48 per cent) of respondents said they’ve faced a “significant” increase in auto insurance premiums recently.

2:13
Auto insurance premiums rising: What can Canadian drivers do to trim the bill?

IBC looked at data from Ontario, Quebec, Alberta as well as the Atlantic provinces.

Its analysis did not include data for Saskatchewan, Manitoba and British Columbia since it was unavailable.

Among the provinces included, Quebec saw the largest drop (44 per cent) in the number of insurance claims for auto theft, followed by Ontario at 16 per cent.

In Nova Scotia, the claims actually went up by 27 per cent, as they did in New Brunswick by 14 per cent, as well as Alberta reporting a 0.7 per cent rise.

This mirrors the Équité data which showed an 11 per cent jump in vehicle theft for Atlantic provinces.

“Experts credit these regional differences to the opportunistic nature of car thieves, who may be shifting their focus away from provinces like Ontario and Quebec, where law enforcement has invested significantly in combatting auto theft, toward western and Atlantic provinces,” IBC said.

2:31
New programs using tracking devices to fight auto theft

Over the past year, the federal government, along with law enforcement agencies, border officials and other industry stakeholders, have stepped up efforts to curb vehicle theft in the country.

A national summit on combatting auto theft was held in Ottawa in February to address the problem.

The federal government unveiled an action plan in May, including measures and funding announced in the weeks since the summit was held.

It also featured changes to the Criminal Code, such as stiffer penalties and new offences targeting car thieves and the devices they use, that were included in the latest federal budget.

Transport Canada is currently carrying out an open consultation to review and modernize the current standards that vehicles that are manufactured or sold in Canada are expected to adhere to.

In addition to updating Canada’s motor vehicle safety standards, the IBC is urging immediate action to stop stolen vehicles from being shipped overseas with tighter export regulations and better screening at ports.

— with files from Global News’ Craig Lord

&copy 2024 Global News, a division of Corus Entertainment Inc.

• Dividends are a valuable source of return when investing in stocks, but dividends that are too high can be detrimental to shareholders in the long run.
• The dividend payout ratio is a key measure of a company’s ability to balance returning value to shareholders and investing in the future.
• These three stocks pay big dividends and have the money to invest back into their business.

Getting income from stock investments is why many invest in certain companies. It can provide a stable cash stream while offering the benefit of potential appreciation in stock price. However, companies must balance how much they pay their shareholders through dividends and how much they retain to reinvest back in their business.

If a company has valuable projects to pursue but lacks cash, its high dividends could hurt shareholders in the long run. One way to measure a company’s ability to reinvest is to look at the dividend payout ratio (DPR). This ratio shows the percentage of the company’s earnings it pays out as dividends.

If the dividend payout ratio is too high, the company might not have the cash it needs to invest in potentially high-return projects in the future. This could include making large capital expenditures (CAPEX) or strategically acquiring another firm.

The inability to do this could negatively affect the stock price over time or prevent it from rising as much as it otherwise could. Below, I’ll review three U.S. stocks with dividend yields over 5% and dividend payout ratios that allow for solid reinvestment back into their business. For this analysis, I’ll use these companies’ next 12-month (NTM) dividend yield, which is an average of analyst projections for the company’s dividend yield.

1. Ford Motor: Lots of Dividend Income and Lots Left Over

First up is Ford Motor (NYSE:). Ford’s NTM dividend yield of 5.6% is relatively high, and its dividend payout ratio over the last 12 months is low. It sits at just 13.8%, meaning that the company is retaining over 86% of its earnings to reinvest back into the firm. Based on the company’s net income over the last 12 months, it has been over $3.3 billion, and the company has to put it toward different uses.

This gives Ford the flexibility to invest in projects, initiate a share buyback program, or increase dividends. This is crucial, as the automotive industry is capital-intensive, requiring significant investments in plants, property, and equipment to stay competitive. With the global shift toward electric vehicles, maintaining financial flexibility will help Ford remain nimble, allowing the company to adapt to market changes and meet evolving customer preferences. This ability to invest strategically is key to Ford’s long-term success in the rapidly changing automotive landscape.

2. AT&T: 5% Dividend While Investing Big in Fiber Optics

AT&T (NYSE:) is a telecom company that provides big-time income to its shareholders while not overextending its commitments. Its 5.1% NTM dividend yield offers a solid base of return. Its dividend payout ratio is 64%. It’s a bit higher than I would like to see, but it’s below 75%, where concerns about sustainability may arise. Again, its industry is key to why the company must retain earnings to compete effectively. AT&T is investing heavily in fiber optics to connect more homes and businesses to the Internet.

Building fiber optic networks requires digging trenches on land or underwater or building above-ground cable systems. These cables physically connect buildings to centralized data centers, allowing for faster internet speeds. Thus, these investments require significant CAPEX from AT&T. The company is doing just that, having spent $17.4 billion in CAPEX over the last 12 months. Fiber optics investments are vital to the firm’s strategic plan to compete with large telecom firms.

3. Ares Capital’s Dividend Strategy Balances Payouts and Growth Potential

Last on the list is Ares Capital (NASDAQ:). Ares is a business development company (BDC). BDCs invest in private companies using both debt and equity. Because of this, investing in Ares is an indirect way to gain some exposure to private debt and private equity, making Ares an interesting stock. On top of this, Ares also provides its shareholders a massive dividend yield.

Analysts project the number to sit at just under 9.3% over the next 12 months. In addition, its dividend payout ratio is 63%. Again, maybe a bit on the high side, but Ares is not in an industry that requires much in the way of capital expenditures.

However, retaining more of its net income does allow the company more “dry powder” to invest with. This means that if it sees an opportunity that could bring in particularly high returns but requires a large upfront investment, it could be more capable of executing the deal.

Original Post

• Several small-cap stocks are vying for dominance in the aerospace and defense industry, particularly in the rapidly growing space race.
• Morgan Stanley projects the space industry’s value to reach $1 trillion by 2040, offering immense growth potential despite significant risks.
• Three standout small-cap stocks in the aerospace sector are Rocket Lab, Intuitive Machines, and Redwire Corporation.

An exciting theme is emerging within the industrial sector as several small-cap stocks battle for dominance in the aerospace and defense industry, particularly in the space race. Space investors today have many choices, ranging from established defense titans to narrowly focused start-ups.

Morgan Stanley forecasts the space industry could reach $1 trillion by 2040, presenting immense growth potential. However, the path to success is filled with risks, as even the most advanced players face setbacks while bringing new, innovative products online.

While the number of customers in this space remains limited and government influence is still a significant factor, three small-cap aerospace and defense stocks stand out as they expand their operations in space. These stocks could be a good choice for investors seeking high growth and willing to embrace elevated risk.

1. Rocket Lab USA

Rocket Lab USA (NASDAQ:) has become one of the top-performing space stocks of 2024, recently reaching a 52-week high of $8.98 per share before pulling back slightly to $10.69. Over the previous year, the stock has rocketed over 121% and is up over 75% YTD. Rocket Lab’s strength lies in its diversified revenue streams, with around 70% of its income coming from its launch and space services businesses.

The company continues to progress with its Electron rocket, which is designed to launch small satellites. Having successfully launched its 53rd Electron rocket in September, Rocket Lab estimates that demand for small satellite launches will soar, expecting over 10,000 satellites to require launching by 2030.

However, profitability still needs to be discovered, which complicates valuation. The bullish case hinges on Rocket Lab’s resilience and the upcoming Neutron rocket, designed to handle larger payloads and open new revenue streams. Despite the challenges, Rocket Lab’s solid track record suggests it can navigate the industry’s obstacles while pursuing long-term growth.

2. Intuitive Machines

Intuitive Machines (NASDAQ:) has had an outstanding year, with its stock surging 187% YTD. The company focuses on space systems and infrastructure, specializing in enabling scientific exploration and the sustainable utilization of lunar resources to support human presence on the moon.

September was a standout month for LUNR, as its share price jumped from $6 to nearly $10 after securing a significant contract with NASA. On September 17, NASA awarded Intuitive Machines a Near Space Network contract, potentially worth up to $4.82 billion over the next decade. This deal includes deploying lunar relay satellites and providing vital communication and navigation services for NASA’s Artemis campaign.

Looking ahead, the company’s IM-2 mission, set for January 2025, will deliver an ice drill and mass spectrometer to study lunar ice. Although analysts forecast $371 million in revenue next year, they don’t expect profitability until at least 2026, making LUNR a speculative investment suitable for those with a high-risk tolerance.

3. Redwire Corporation

With a market cap of just $444 million and modest daily trading volume, Redwire (NYSE:) is relatively under-the-radar among space stocks. However, its performance in 2024 has caught the market’s attention, with the stock up 138% YTD. Redwire provides essential space infrastructure and solutions to both government and commercial clients worldwide, making it a key player in the space economy.

Most notably, Redwire announced on October 2 that it’s providing the critical onboard computer system for the European Space Agency’s (ESA) Hera mission, Europe’s first flagship planetary defense mission. Hera works with NASA’s DART mission, which successfully impacted the asteroid system Didymos in 2022, using Redwire’s power and navigation tech.

Despite weaker-than-expected earnings in Q2 2024, analysts remain bullish on Redwire due to its revenue growth and technological advancements. The company reported ($0.27) per share, missing the consensus estimate by $0.15, but exceeded revenue expectations with $78.11 million. With a consensus Buy rating and a price target of $7.65, analysts see nearly 13% potential upside for the stock.

Original Post

Stock prices were little changed on Wednesday, with the closing 0.01% higher after rebounding from the daily low of 5,674. The market dipped below 5,700, slightly extending Tuesday’s decline of 0.9%.

On Tuesday, I mentioned that the market “may see some more short-term uncertainty and a sideways trading action,” and it’s proving correct.

This morning, the S&P 500 is likely to open 0.1% lower, as indicated by futures contracts. The sentiment remained unchanged following a slightly higher-than-expected release.

Investor sentiment slightly worsened, as shown by yesterday’s AAII Investor Sentiment Survey, which reported that 45.5% of individual investors are bullish, while 27.3% of them are bearish, up from 23.7% last week.

The S&P 500 rebounded from its mid-July high yesterday, as we can see on the daily chart.

Nasdaq 100: Consolidation Following Tuesday’s Decline

The gained 0.15% on Wednesday, retracing some of Tuesday’s 1.4% decline. Recently, it pulled back from the resistance at 20,250; on Tuesday, it traded as low as 19,622.

This morning, the Nasdaq 100 is expected to open 0.1% lower.

VIX Remains Near 20

On September 6, the , a measure of market fear, reached a local high of 23.76. It was indicating elevated fear among investors. However, a stock rebound followed by a record-breaking rally pushed the VIX lower.

Last Thursday, it fell to 14.90, its lowest level since late August. However, with stock prices pulling back on Tuesday, the VIX jumped back to around 20, reaching a local high of 20.73.

Historically, a dropping VIX indicates less fear in the market, and rising VIX accompanies stock market downturns.

However, the lower the VIX, the higher the probability of the market’s downward reversal. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.

S&P 500 Futures Contract: Moving Sideways Again

Let’s take a look at the hourly chart of the contract. Since Tuesday’s drop, the market has been moving sideways, trading within another consolidation phase.

The support level is around 5,725, with the next one at 5,680–5,700, marked by mid-September fluctuations. The market may still be in a topping pattern ahead of a potential correction. Resistance remains at 5,780–5,800.

Conclusion

Tuesday’s trading session brought back some pessimism as markets reacted to news of the Israel-Iran conflict. However, yesterday, the market traded mostly sideways, and the S&P 500 extended its consolidation above its mid-July local high of around 5,670.

On Tuesday, I wrote:

“The key question is whether the uptrend will continue despite overbought conditions. While no clear negative signals have appeared, the rally seems overstretched.”

The question remains: is this a topping pattern before some more meaningful downward correction or just a consolidation before another leg up?

I opened a speculative short position in the S&P 500 futures contract on September 16.

In my Stock Price Forecast for October 2024, I wrote:

“The market extended its uptrend in September after rebounding from the early August low. No clear negative signals have surfaced; however, a correction could still occur. Historically, October is a seasonally weak month, especially during its first weeks. Will the stock market sell off soon? Although monetary policy easing supports the bulls, uncertainty surrounding geopolitical risks and the upcoming presidential election may still weaken sentiment.”

For now, my short-term outlook remains bearish.

Here’s the breakdown:

• The S&P 500 is likely to continue consolidating following Tuesday’s pullback.
• The market may still be forming a topping pattern before a downward correction.

In my opinion, the short-term outlook is bearish.

After falling to their lowest level last year (in Wall Street Horizon’s eight years of data), the total number of announced global corporate buybacks has been improving throughout 2024. Higher borrowing costs and recession fears have a tendency to lead US corporations to hoard cash rather than allocate it to stock repurchase programs, which have been popular in the last decade. However, as the Fed begins to lower interest rates and the economy remains strong, certain companies are starting to spend again.

Heading for $1 Trillion with a Capital T

In 2023, only 617 companies announced buybacks, and that was after only 649 announced in 2022, as compared to 1,319 companies doing so in 2021 and 947 in 2020, despite the disruption caused by the COVID-19 pandemic. The large amount of buyback announcements in 2021 led to a total of $922B in repurchased stock for ® companies in 2022, an all-time high. That fell to $795B in 2023.

With the Federal Reserve cutting interest rates by a half point two weeks ago, buyback activity is likely to pick up, and continue the upward trend seen thus far in 2024. Goldman Sachs predicts the total to reach $925B this year, surpassing the 2022 record, and moving on to cross the trillion dollar mark in 2025.

Thus far in the first three quarters of this year, we have recorded 565 buyback announcements for global, publicly traded companies. This is compared to 440 in the first three quarters of last year, and the 5-year average of 715.

Source: Wall Street Horizon

An Age Old Debate: Are Buybacks Good or Bad?

As interest rates fall, holding onto cash tends to become less attractive to corporations who want to deploy and put it to work. Typically, buybacks are a good thing for shareholders as well, as they artificially improve earnings per share of a company, if not actually improving earnings.

Share repurchases come under fire for this reason as well, with many arguing that companies could have put the money to better use by investing it back into the company. Investors tend to prefer companies that are buying back shares while also investing in growth. A great example is the mega tech names, many of which are the largest buyers of their own stock, but also tend to invest heavily in research and development and AI, among other things.

The Bottom-Line

With the Q3 earnings season set to kick-off next Friday, October 11 with reports from the big banks, investors will want to keep an eye on buyback announcements. An increase in share repurchases would signal that corporate America is willing to part with cash once again, which could have good implications for the US economy.

• Artificial intelligence (AI) deployment is fueling data center growth along with electricity demand, as data centers will use 8% of all electricity in the U.S. by 2030.
• Constellation Energy has the largest power purchasing agreement with Microsoft (NASDAQ:) over 20 years, which will require restarting the Three Mile Island Unit 1 nuclear reactor by 2028.
• Amazon’s AWS unit acquired Talen Energy’s 1,200-acre data center co-located with its nuclear plant for $650 million, but the deal is being challenged due to the “free ride” Amazon is getting from bypassing grid transmission fees.

The artificial intelligence (AI) revolution is well underway. There are three essential components to deploy AI: the GPU, like NVIDIA Corporation (NASDAQ:) chips to crunch the data; storage, like Micron Technology Inc (NASDAQ:) flash and high-bandwidth memory (HBM) memory chips to store the data, and networking like Ciena Corp (NYSE:) optical transceivers to move the data.

However, there is one absolutely crucial component that overrides all the others: electricity, and lots of it.

AI has been driving the growth of data centers, which require increased electricity to operate, as AI processing can take 200% to 300% more electricity for optimal efficiency. The power and clean energy providers in the utilities sector are the indirect beneficiaries that are helping fuel the AI boom. Here are two energy stocks that are specifically powering AI and data centers.

1. Constellation Energy

Constellation Energy Co. NASDAQ: CEG make major headlines by announcing the largest power-purchasing deal in history with Microsoft Co. NASDAQ: MSFT.

Constellation will invest $1.6 billion of its own money to reactivate the 835 megawatt (MW) nuclear reactor Unit 1 on Three Mile Island, which is expected to return to service in 2028. Constellation will also try to extend the license renewal for at least another 30 years.

Reviving Three Mile Island Unit 1 as Crane Clean Energy Center

The controversial Three Mile Island nuclear project was shut down in 1979 after a partial meltdown of Unit 2. This sparked a worldwide backlash against the dangers of nuclear reactors. However, Constellation states it was one of the safest and most reliable nuclear plants on the grid before being prematurely shut down. It will be renamed the Crane Clean Energy Center once it restarted.

This is assuming it gets all the permits and regulatory approval from the Nuclear Regulatory Commission (NRC). Chances are high for the approval, considering Unit 1 was still operating until 2019, when Constellation voluntarily curtailed the reactor due to profitability concerns. The NRC is expected to decide on its fate on July 31, 2025. The deal would create over 3,400 jobs, generating at least $3 billion in taxes for Pennsylvania.

Constellation Energy is the largest owner and operator of power plants in the United States, generating energy from a number of renewable sources, including wind, hydro, and solar, along with nuclear and coal. They are the nation’s largest owner and operator of nuclear plants, supplying energy to residential, commercial and industrial customers.

Spotlighting the Enormous Energy Needs of Data Centers

In addition to being the largest power purchasing agreement in history, the deal also spotlights the growing power needs of data centers to power AI projects. Microsoft will be using nuclear-generated electricity to power its 635 MW data center. The news sent shockwaves, triggering a buying frenzy among uranium producers like Cameco Corp (NYSE:), which provides the yellowcake to fuel the reactors.

AI Is Driving Worldwide Data Center Power Demand

According to a Goldman Sachs report, data centers will consume 8% of all electricity produced by 2030, with AI driving a 160% increase in power demand. A ChatGPT query consumes 10x more electricity than an Alphabet (NASDAQ:) Inc. NASDAQ: GOOGL Google search. U.S. utility companies will need to invest $50 billion in new generation capacity alone to accommodate the needs of data centers.

Europe is in the worst shape, with the oldest regional power grids on the planet, averaging 50 years old. Goldman Sachs predicts Europe will need over $1 trillion to prep its power grid to accommodate AI deployment, which will drive 40% to 50% more electricity demand.

2. Talen Energy

Talen Energy Corp (NASDAQ:) is a Texas-based independent power producer that owns and operates power plants. The company also operates nuclear, coal, and power plants and solar and wind farms. Talen emerged from Chapter 11 bankruptcy in 2023.

In March 2024, Talen sold its 1,200-acre Cumulus Data Assets data center to AWS of Amazon.com (NASDAQ:) for $650 million. Talen will sell electricity to the data center campus in 120-MW increments up to 960 MW with a one-time option to cap commitment at 480 MW, up from 300 MW.

Don’t Let the Name Fool You

Talen Energy’s flagship asset is the Susquehanna Steam Electric Station in Salem Township, Pennsylvania. It is the sixth-largest nuclear plant in the country. It produces 63 million kilowatts daily between two nuclear reactors that have been online since 1983 with licenses to operate through 2042.

The word “steam electric” in its name sounds less ominous than “nuclear,” but it is a nuclear power plant using nuclear fission to heat the water to make the steam that spins the turbines to generate the electricity. The steam is cooled and condenses back to water, which is recycled and pumped back into the reactor to heat again. This closed-loop cycle repeats itself indefinitely, generating 2.5 gigawatts or 2,500 MW of carbon-free clean energy.

Co-Location Controversy: Amazon Under Scrutiny for Bypassing Fees

Amazon’s newly acquired data center also happens to be co-located adjacent to the Susquehanna Steam Electric Station. In addition to buying the data center, Amazon also struck a deal to buy an additional 180 MW directly from the nuclear plant. This bypasses the electrical grid and the accompanying $140 million in transmission fees, which are used to maintain the power grid.

It has irked enough third parties that the deal is under regulatory scrutiny. Exelon Corporation (NASDAQ:) and American Electric Power Company Inc (NASDAQ:) challenged the Amazon-Talon deal with the Federal Energy Regulatory Commission (FERC), stating that Amazon is getting a free ride bypassing the transmission fees, which would mean their customers would undertake the burden of the $140 million in costs. They claim Amazon would still be using and benefitting from the transmission system and should pay its share.

Talen Energy argues the major utilities are just trying to squash their deal and urged regulators to reject the challenge. FERC’s decision will likely set a precedent as co-location proposals have started to rise in states including Ohio, New Jersey, and Texas.

Original Post