Morningstar Advisor - June/July 2011 - (Page 32)

Sector Rap Caution in Utilities After Japan Crisis By Philip Guziec Japan’s post-tsunami nuclear disaster has created uncertainty in the utilities space, especially among nuclear-plant operators. After the earthquake and tsunami in Japan, another crisis began at several nuclear reactors on Japan’s eastern coast. To gauge the impact this ongoing event will have on utility companies, I sat down with my Morningstar OptionInvestor co-editor Erik Kobayashi-Solomon and utilities analysts Mark Barnett and Patrick Goff to discuss the disaster and the utilities landscape. Philip Guziec: Erik has done a lot of research into the situation. Erik, can you give us some background on what really went down? Erik Kobayashi-Solomon: There was an earthquake offshore from Sendai, the largest city in eastern Japan. Two nuclear plants, Fukushima 1 and 2, received damage in the resulting tsunami—Fukushima 1 damage being much worse. As of April 12, the Japanese Nuclear and Industrial Safety Agency raised the severity of the nuclear incidents to level seven on the International Nuclear and Radiological Event Scale. Guziec: And can you help us understand what that seven rating means? Kobayashi-Solomon: It is the most severe disaster on a scale of one to seven and indicates a situation involving a major release of radioactive material with widespread health and environmental effects. To put it in context, the only other level seven accident has been Chernobyl. At the Fukushima plant, there were four reactor buildings that were heavily damaged, and two others that were not as badly hurt. Fukushima 1 accounts for about 7.5% of Tokyo Electric Power’s capacity. Fukushima 2 accounts for 7%. Also, several thermal plants that are still shut down account 32 Morningstar Advisor June/July 2011

Table of Contents for the Digital Edition of Morningstar Advisor - June/July 2011

Morningstar Advisor - June/July 2011
Letter From the Editor
Questions for the Secret Society
Are 529 Plans a Useful Tool for Clients’ College-Savings Goals?
Taking the Lead
How to Sell Covered Calls
The College-Savings Challenge
Time to Play Defense?
Four Picks for the Present
Investment Briefs
Careful What You Wish For
Caution in Utilities After Japan Crisis
Blossoms and Thorns in the 529 Garden
Lower Fees, Competitive Returns Help More 529s Make the Grade
Morningstar Grades 529 Plans
529 Risks Include the Political
Researching 529 Plans Made Easy
How Closed-End Funds Are Born
Boutique Within a Bank
The Inefficient Pricing of Moats
More Steak Than Sizzle
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The Dangers of Demonizing

Morningstar Advisor - June/July 2011