(September 2005) Top honors in our first annual financial ranking go to those staying with the basics and to those dealing with soaring commodity prices.
The Fortnightly 40 Financial Ratings
Which is the best energy company?
a Canadian firm behind Duke Energy's $8.2 billion acquisition of Westcoast Energy in September 2001, according to Thomson Financial. Will this acquisition keep Kinder Morgan on the top of the next year? Certainly, the MLP structure will be very competitive with other types of corporate structures. In 2004, total returns for pipeline MLPs were 23 percent, while the Standard & Poor's 500 was up 11 percent, according to SmartMoney.com.
Of course, the result of financial performance of this type is that many utility CEOs may be thinking of changing their corporate structure.
Unfortunately, most utilities thinking of becoming an MLP simply can’t. Shaper points out that retail sales of electicity or gas do not qualify for MLP treatment. (According to experts, the Internal Revenue Service has very specific guidelines over what type of assets will qualify.) Shaper, meanwhile, seems set on the concept.
"In terms of total return to shareholders," Shaper explains, "MLPs offer a very attractive proposition," But will that be enough to keep his company atop the 40 in 2006?
Many industry watchers say that with the completion of mergers such as that of Duke Energy-Cinergy, Exelon-PSEG and MidAmerican-PacifiCorp, plus other expected consolidations, it may be difficult for Kinder Morgan to hold on to the crown. Furthermore, many companies that have fixed their balance sheets and gone back-to-basics after the merchant overbuild of the early 2000s have been gaining momentum on the financial tables. As for Shaper, we know whom he's betting on. Watch these pages to find out who makes next year's Fortnightly 40 .
Editor's Note: The financial model, underlying assumptions, and performance criteria of the Fortnightly 40 financial rankings is the sole intellectual property of Public Utilities Fortnightly and its holding company, Public Utilities Reports Inc. Any attempt to reproduce, copy, modify, alter or use the Fortnightly 40 financial model without the express permission of the publisher is prohibited.
Correction: In the 2005 financial rankings of the Fortnightly 40, Progress Energy’s 2002 net income was overstated because of a data-entry error by financial data provider C Three Group LLC. The net income of Progress Energy for 2002 should have been $528 million, which ties the utility for 37th place with DTE Energy on the Fortnightly 40. Fortnightly regrets the error.