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Maguire: US energy investors manage exposure as the tax bill debate continues.

Energy equity investors have been adjusting their positions in the U.S. Power sector to try and pick winners and reduce losers before the final passage of President Donald Trump’s tax-and spending bill.

The "One Big, Beautiful Bill Act", which contains aggressive reductions to tax credits and incentives related to clean energy generation using renewable sources, has caused a sell-off of stocks in the sector.

The bill also accelerates the phase-out for federal support of electric vehicles, clean energy components manufacturing and wind farm developments.

The latest U.S. Senate proposal - which is a tweaked version of the version passed by the U.S. House – preserves support for geothermal, battery storage and nuclear projects. It also triggered gains in nuclear stocks.

Energy investors will continue to jostle for position in the coming weeks as Congress makes more adjustments to the proposed bill.

The following is a list of key exchange-traded fund (ETF) and equity sectors in the energy sector that were and will be the most affected by the proposed budget.

SOLAR SOCKS

The stocks of companies involved in solar panel production, inverter installation and solar system installations will be among the worst affected by the bill's final composition.

Many Republican legislators and the Trump administration are opposed to federal subsidies for solar energy for several reasons. These include concerns over its intermittent nature and its heavy dependence on components manufactured in China and other countries.

The Senate's latest budget bill proposal eliminates all solar subsidies and tax credits by 2028.

The solar industry has already been affected by the rising cost of installation due to the interest rates. Now, the rapid elimination of federal assistance has severely impacted the prospects of several companies.

The stocks of solar panel manufacturers First Solar, Sunrun, and SolarEdge as well as inverter maker Enphase have all fallen by at least 20% in the last month. This is due to the ramifications that the proposed bill has.

Invesco's Solar ETF shares fell to five-year lows on April. They are now down 50% in the last two years, as investors have jettisoned their positions. The sector's outlook has also dimmed under the Trump administration.

Nuclear and geothermal

Many energy investors who wanted to exit the solar sector have shifted their money into the nuclear industry, which is gaining support under Trump's administration.

Global X Uranium ETF gained over 35% of its value in the last month and has recently reached its highest levels for more than a decade.

Investors are drawn to this fund because of the possibility of a shortage of uranium, the primary fuel used in nuclear power plants, if more reactors come online after the tax bill is passed.

The latest bill negotiations have preserved provisions that support the geothermal sector, which has led to a recent rally in stocks of companies involved in geothermal energy production.

Since early May, shares of Nevada-based Ormat Technologies have risen by more than 30%. Ormat Technologies makes power converters and geothermal plants.

MAJOR, GRIDS AND LNG

As the demand for fossil fuels is likely to increase due to the elimination of clean energy subsidies, investors in the energy sector have recently increased their positions within funds and companies that are part of the traditional oil and natural gas industry.

The SPDR Energy Select Fund, which owns several major oil producers and gas companies, has rallied due to recent tensions in Middle East as well as the better outlook for U.S. demand for gas if renewable energy is stopped.

The proposed bill will benefit firms with large gas production businesses if it slows down the growth of renewable energy and increases the U.S. electricity sector's dependency on gas.

The Trump administration has been supportive of expanding LNG exports, which has helped the shares of companies in the liquefied gas sector.

Shares of Cheniere Energy, the largest U.S. exporter of LNG, are up over 50% in the last year and around 10% for the year to date.

Investors also increased their exposure in ETFs, and to companies that are dedicated to upgrading the U.S. grid. These have positive outlooks no matter what the final tax bill looks like.

First Trust North American Energy Infrastructure Fund has gained about 4% year-to date, while First Trust Smart Grid Infrastructure Fund has gained around 12%.

Investor interest in battery storage is expected to grow, and the iShares Energy Storage and Materials ETF has already been on the radar of investors.

The value of the fund has fallen by around 5% so far this season, in part due to the dimmed prospects for solar power growth. This is because utilities are pairing battery systems with solar panels to ensure round-the clock supplies.

In the months to come, utilities will likely continue to increase their use and adoption of battery systems, even if their solar system uptake slows down. This is because the combination of solar plus batteries remains the most efficient way to add new power to U.S. Grids.

These are the opinions of a columnist who writes for.

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(source: Reuters)