[BETA] Fortnightly

 

Interviews by

What next? That seems to be the question on every utility executive's mind. After two years of stomach-wrenching ratings downgrades, agonizing downward valuations, embarrassing accounting scandals, skyrocketing gas prices, and positively stubborn mild weather, or the "perfect storm," as many have called it, many believe the worst is now over.

But will the the recovery be worth the wait?

On the plus side, the Northeast blackout of two months ago failed to slow the recent recovery. It came on the heels of a booming stock market, lower interest rates, and a strong winter heating season that helped utilities stabilize credit ratings and turn in a fairly strong second quarter. The dividend tax repeal added still more good news, helping to drive up the Dow Jones Utility Index by double-digit percentages.

If anything, the Blackout may give cover for power executives seeking to invest in infrastructure as part of a back-to-basics strategy.

Yet many executives still urge caution. Just ask Northwestern, which filed for bankruptcy in mid-September, or PG&E Corp., who at press time was dealing with the bankruptcy of its wholesale merchant unit, even as its regulated utility begins to emerge from insolvency, pending regulators' approval of the company's reorganization plan in December. Allegheny Energy, another investor-owned utility, was still flirting with bankrupty at last look. Analysts say the company has much to do to improve its balance sheet and restore investor confidence.

And others look deeper into the future to ask a basic question: What kind of growth will investors expect from a move back to basics? With interest rates now rising, utility stock dividends will face stiff competition from higher returns on fixed-income securities. Simply put, will a back-to-basics growth rate prove sufficient to keep investors interested in utility equities?

To find the answer, offers exclusive interviews with the chief financial officers (CFOs) from Southern (ticker: SO), FPL (ticker: FPL), TXU (ticker:TXU), and Northeast Utilities (ticker: NU), and with the chief executive officer of Aquila (ticker: ILA).

In those intereviews, Southern and FPL explain how they plan to grow earnings through unregulated wholesale operations, while NU, Aquila, and TXU, sobered by unregulated strategies that went sour, talk about their recovery and beyond.

From all of us at the , we hope you enjoy this year's finance forum.

---

---

Knit One, Purl Two:
Southern Sticks to the Business It Knows

Thomas Fanning, executive vice president and CFO, Southern Co.

When it comes to the issue of strategy, Southern Co. does not mince words; it's going to remain in the same stick-to-its-knitting, traditional, vertically integrated, low-risk business that it has always been in and has always known. Yet as the economy improves and new opportunities emerge many ask how does Southern know that stick-to-your knitting is going to be successful this next time around. Thomas Fanning, executive vice president and chief financial officer of Southern Co., offers an explanation as to Southern's strategic philosophy. "Do you know the old Sun Tzu saying, 'know yourself, know your enemy?'" he asks, quoting from the oldest and most prestigious texts on strategy and