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Business & Money

Some big utilities are looking to get bigger.
Fortnightly Magazine - March 15 2003

about the same for the last three or four years. We have had about 40 some transactions in the United States, and 75 internationally. The number of deals haven't really changed, but the volumes are substantially less and the deal sizes are dramatically smaller," Holzschuh says.

In fact, according to the investment bank, in 1999 and 2000, the average transaction was about $1.5 billion per deal. Last year, in North America, it was about $350 million. Furthermore, in 2002 overall M&A activity was 25 percent of the volume of 2000, a peak year. Many of the deals in 2002 were much smaller and involved all cash, which will continue to be a prerequisite in the current market environment for utilities, he says (see Chart 2). Holzschuh predicted M&A activity would be in the $75 billion to $100 billion level in the states going forward, and that European utilities would play a more prominent role in U.S. acquisitions.

"International buyers could come in as their own markets have become limited in growth. There is $100 billion in these five European companies alone in what you call headroom [for possible M&A]," says Holzschuh. In fact, he believes that in the years to come the Exnet Utility M&A Symposium at which he spoke will have to be conducted with translators. Sprechen sie Deutsch?

Business News Bytes

AGL Resources Upgraded to 'A-' by Fitch Ratings

AGL Resources Inc. announced in late February that Fitch Ratings had upgraded the senior unsecured debt ratings of AGL Resources Inc. (AGLR) and its financing subsidiary, AGL Capital Corp. to 'A-' from 'BBB+.' In a press release issued Feb. 14, 2003, Fitch stated: "The ratings action reflects the anticipated de-leveraging and improvement in consolidated coverage ratios resulting from AGL Resources' recent issuance of $141 million of new common equity, proceeds of which will be used to retire short-term debt. In addition, the revised ratings levels incorporate the low business risk profile of AGLR's core regulated gas distribution business and management's favorable track record of operating and investing in a modest-sized portfolio of non-regulated businesses."

New Issue: Equitable Resources Sells $200 Million in Debt

Equitable Resources sold $200 million of 15-year bonds in the 144a private placement market in late February, market sources said. Goldman, Sachs & Co., Lehman Brothers Inc., and SalomonSmithBarney were the joint book-running managers for the sale, the sources said.

SCANA Announces 6.2 Percent Dividend Increase

SCANA announced that its board of directors, at a meeting in late February, increased the quarterly cash dividend rate on the company's common stock to 34-1/2 cents per share from 32-1/2 cents per share, an increase of 6.2 percent. The new dividend is payable April 1, 2003, to stockholders of record at the close of business on March 10, 2003, for the quarter ending March 31, 2003.

FERC Sets Stricter Debt Terms for U.S. Utilities

The Federal Energy Regulatory Commission (FERC) in late February authorized Westar Energy Inc. to issue up to $650 million in long-term, unsecured debt in an order that also set stricter rules for all future U.S. utility debt