Investing.com — Vistra shares plunged 13.5% on Wednesday after a big Democratic victory in the U.S. midterm elections raised concerns about the future of data center development in Texas, prompting KeyBanc to downgrade the power generator.
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KeyBanc analyst Sophie Karp cut Vistra Energy (NYSE: VST) from overweight to sector weight, arguing that the election results introduce significant political uncertainty for companies providing electricity to large industrial customers and data centers. She identified Vistra as having the greatest exposure among the companies covered by the firm.
The biggest result for the electric industry came in Texas, where Democrat Gina Hinojosa beat Republican Gov. Greg Abbott by about seven percentage points, becoming the state’s first elected Democratic governor since 1990.
Hinojosa has campaigned for tighter restrictions on data center development, including a moratorium on new construction until lawmakers establish additional requirements. His proposals include greater community input, protections for local water and electricity supplies and requirements that developers cover infrastructure costs rather than passing them on to households and taxpayers.
Karp described the result as a negative surprise for investors, warning that the policy change could materially affect companies with heavy exposure to large electricity customers.
Vistra faces greater exposure than Constellation
KeyBanc identified Vistra and Constellation Energy (NASDAQ: CEG) as vulnerable to the changing political environment, but said Vistra was the most exposed.
Both companies benefited from expectations that artificial intelligence would drive sustained growth in electricity demand. However, their generation portfolios and geographic footprints differ, leaving them with different levels of exposure to potential changes in Texas energy policy.
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Vistra has a significant presence in the Texas electricity market, where its generation assets are expected to benefit from growing demand and potentially higher wholesale electricity prices. Restrictions that slow data center development could weaken these growth expectations.
Constellation is also exposed to the broader debate over data center power consumption, although its generation portfolio is more geographically diverse.
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