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Wall Street wants utilities to return to basics, but the CEOs worry it won't be enough.
Fortnightly Magazine - October 15 2003

expect that utility growth plans will be extremely conservative.

"It's too hot to touch," says one.

If Not, Then What?

As George Bilicic, managing director and head of Lazard's Global Energy and Power Group, wrote in our Sept. 15th issue, "the organic growth prospects of many utility and power companies fundamentally relate to demographic and macroeconomic trends, which suggests much lower growth rates." In fact, some analysts predict that earnings growth may fall well below the 5 to 7 percent normally associated with regulated utilities.

That has prompted many energy execs to begin looking at strategic options, albeit grudgingly. Many bankers have confessed that merger discussions are happening all over the industry.

But some utility CFOs have found these higher growth expectations to be quite unfair. During last month's conference, a utility CFO said to an investment banker:

"What does the market want from us? Here is our business and this is what we do. We do this year-in and year-out. Sometimes it is viewed favorably and sometimes it is not. When we are not being fairly valued or being valued below our peers, people tell us they want growth. If that is my business and you want growth, then I have to do something else. And when I do that something else, you are not happy when it doesn't work out."


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