Foreign Utilities Outlook 2009

The global economic slowdown is in full swing, but the world's growing population, driven by developing countries and the prospects of future economic growth, points to higher energy consumption.

The Mid-Year International Energy Outlook 2008 (IEO 2008) projection estimates that worldwide energy consumption will increase by 50% from 2005 to 2030 led by demand from developing nations. Positioning an investment portfolio to take advantage of this trend as we approach the new year requires U.S. investors to look abroad to foreign power utilities. Let's have a look at some of the globe's top players. (To begin with the basics, read How do I invest in foreign stock markets?)

Chinese Power
As the most populous country in the world, China is embracing the growing energy needs of the country's 1.3 billion people. Investors may not be able to invest directly in the Three Gorges dam project, the largest hydroelectric power station in the world, but investors can evaluate the prospects of Huaneng Power International (NYSE:HNP). HNP is one of the largest listed power generation companies in China.

Huaneng Power owns 16 operating power plants and is a member of an alliance supporting the development of additional hydroelectric dams further upstream. As a note of caution, investors should keep in mind the additional risk involved when investing abroad. The development of the hydroelectric power stations in China has not proceeded without controversy over their impact on local farmers who use the rivers.

Brazilian Power
CPFL Energia (NYSE:CPL) is a hydroelectric power generator supporting the growing demands of Brazil. Brazil is the largest economy in South America driven by the strength of its commodity exports and the stability of the government under President Luiz Inacio Lula da Silva. For CPFL's third quarter ending September 30, a strong sales increase in residential, industrial and commercial markets was driven by increases in wages, a robust retail sector, higher temperatures and the transfer of rural customers into its residential segment.

Chilean Power
Empresa Nacional de Electricidad S.A. (NYSE:EOC) is largest electricity generation company in Chile. In addition to revenue generated in Chile, EOC also generates revenue from nearby Columbia, Peru, Argentina and Brazil. EOC is studying and building additional electric generation capacity in Columbia and Peru while focusing on refinancing its debt. For the first nine months of the year, EOC's operating income increase 41% to $1.065 million over the same period a year ago driven by higher energy price and increase usage in each country the energy provider serves.

Final Thoughts
Electricity generation for developed Organization for Economic Co-Operation (OECD) countries including the U.S., Germany, France, Japan and Spain is expected to grow slowly at 1.3%. While demand estimates for developing non-OECD developing nations like Russia, China, Brazil and India is expected to increase by 4.0% per year during the period. Major gains in terms of stock appreciation may not materialize in 2009, but the upward trend of energy consumption abroad is likely to bear fruit over time.