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Business & Money

A spate of proposed U.S. tax rule changes soon may open a window of opportunity for certain utilities.
Fortnightly Magazine - May 2004

selling group.

Alternatively, a utility may elect to hold and enhance the value of its current portfolio by focusing on local-country tax planning, treasury-management strategies, and foreign tax-credit planning. Some companies may even consider making other strategic purchases in the near term to maximize the sale potential of the asset groups to be sold in the future. Or, they may want to use cash from a sale in one operation to reduce their leverage from indebtedness in another, thereby making that second property more salable as well.

Whatever strategy a company ultimately employs, the goal is likely to be the same: to increase after-tax cash positions to reduce economic losses, and to recognize the tax benefit of any losses, especially those that affect financial and tax reporting.

To successfully achieve these goals, and to do so within the window of opportunity the pending legislation may allow, companies must have a solid plan in place. This is especially true for companies that already have written down the value of troubled assets on their balance sheets. The tax rules that govern such assets are complex, and there are many potential traps for the unwary. Penalties also can occur from a lack of adequate controls surrounding reporting requirements. Ignoring the presence of these issues can make a bad situation worse.



Business Bytes

Pacific Gas & Electric Exits Bankruptcy

PG&E Corp. subsidiary Pacific Gas & Electric Co. said April 12 that it emerged from bankruptcy, three years after filing for Chapter 11 protection. The utility said that it resolved $8.4 billion in allowed creditor claims and deposited $1.8 billion in escrow for disputed claims.

Entergy Expects Lower First-Quarter Earnings

Entergy Corp. said first-quarter earnings will be in the range of "at least" 85 cents per share due to mild weather and decreased earnings from an energy-trading venture with Koch Industries Inc., according to an April 12 Associated Press report. The Thomson First Call mean estimate is 95 cents a share for the first quarter. Last year, the company reported earnings of $400.9 million, or $1.73 a share, with operating income of $1.05 per share for the first quarter. Entergy also experienced added expenses due to a natural gas leak at its Magnolia storage facility, but it noted that insurance would cover most of the costs related to the incident.

Two Utility Consortiums Apply To Build Nuclear Reactors

Entergy Corp. said March 31 that it, along with six other companies, will form a consortium to test a new licensing process for building advanced nuclear power reactors. The consortium will work with the U.S. Department of Energy (DOE) to obtain the combined construction and operating license. The group plans to complete the license and submit it to the NRC in 2008. The DOE asked companies to demonstrate the new licensing process in November 2003. If the NRC approves the application in late 2010, the companies could use the license to begin building a new plant, Entergy said. The company said, however, that the consortium is not making a commitment to building a nuclear plant at the present time.