Friday, September 21, 2012
Last week, Japan did the unthinkable.
The nation's leaders announced a plan to completely phase out its massive nuclear power industry within three decades. The news marked a dramatic reversal in policy. It made the front section of the Wall Street Journal...
Meanwhile, an even bigger announcement got buried in the headlines. But the events are closely related. And they've created a tailwind behind a small niche of the global energy sector. Today, I'll show you how to play it...
You're probably familiar with the story by now...
In March 2011, a major earthquake and tsunami swept over eastern Japan, wreaking havoc on the Fukushima Daiichi nuclear plant.
Immediately after the meltdown, Japan's government shuttered the country's nuclear reactors. But most experts believed they'd come back online. Japan had an aggressive plan in place to develop its nuclear program since the early 1970s.
But on September 14, Japan's government adopted a plan to shut down every nuclear reactor in the country inside of 30 years...
In short, the nuclear disaster has led the world's third-largest nuclear-energy consumer – accounting for more than 10% of the global market – to abandon its energy policy. And other countries are following suit...
That same week, France – the second-largest consumer of nuclear energy – said it would cut its share of nuclear power for electricity generation by 33%. Less than a year ago, Germany – the fifth-largest consumer – said it would completely phase out nuclear energy within 10 years. Italy, Switzerland, and Belgium also shelved projects to build out nuclear power stations.
While the U.S. (the largest consumer of nuclear energy), China, and India have not cut back their usage, there's a huge need to replace the massive amount of nuclear fuel coming off the market.
That has sparked a massive, multibillion-dollar wave of spending around the globe as dozens of countries scramble to secure large amounts of natural gas...
And that means more money for investors. Let me explain...
As I said, on the same day Japan announced the death of its nuclear industry, another important story ended up buried among the headlines. And for investors, it's more important than the first...
Japan signed a $13 billion agreement with Russia's energy giant Gazprom to build a new liquefied natural gas (LNG) facility. LNG is natural gas cooled down to a liquid so it can be shipped overseas. And once construction on the facility is completed, Russia will ship its massive supplies of natural gas to Japan.
And that's just the beginning. Over the next few years, over 30 new LNG plants will be in operation worldwide. These plants cost tens of billions of dollars to construct. And most of them are still years away from completion. But global energy companies around the world have already locked-in long-term contracts to supply natural gas.
One beneficiary of this megatrend is the small group of companies that can move LNG around the world.
Day rates are what shipping companies charge customers to use their vessels per day. Day rates surged after Japan turned off all its nuclear reactors following the meltdown. But industry experts believed day rates for LNG tankers would trend lower over the next 12 months – since Japan's nuclear reactors were expected to come back online.
Now that Japan adopted an anti-nuclear energy policy, day rates should stay at exceptionally high levels for many years to come.
Teekay LNG Partners (TGP), for example, owns 20 LNG vessels. The company's cash flow jumped 50% to $57 million over the past 12 months. I expect cash flow to surge even higher in the years ahead as Teekay renews old contracts – with customers like Chevron, Total, and ConocoPhillips – at these much higher day rates.
As countries around the world look to replace nuclear with natural gas to secure their long-term energy needs, Teekay LNG and its peers will see business boom.
Catch up on the American natural gas boom here...
"Getting in early and holding stocks through megatrends is how millionaires are created," Frank wrote earlier this year. "Right now, you have the chance to invest in one of the biggest energy megatrends in more than a decade."
Gold royalty companies are breaking out... Royal Gold and Sandstorm Gold both surge 30% in just two months.
"Death of the PC" continues... victims Dell and Hewlett-Packard are sitting within a few percent of multiyear lows.