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A Constellation Of Risks

Will the deal with FPL serve the best interests of ratepayers? 

Fortnightly Magazine - February 2006
  1. than 1 percent of the combined companies’ combined total costs.
  2. FPL is a slow grower (essentially a pure play regulated utility) with generation assets predominantly of high-cost oil and natural gas plants. What do they bring CEG?
  3. The FPL stock we’ll get is overvalued for a slow grower. A trailing PE of 19, a price to sales ratio of 1.5, and an EV/cash flow ratio of 8.9—those are all at least slightly worse ratios than faster-growing CEG as a standalone company! And if Florida ever deregulates, those results will go down the tubes.

Public Utilities Fortnightly last June interviewed both Shattuck and FPL CEO Lewis Hay III, who would become CEO of the post-merger entity. Hay more recently has trumpeted the growth that will be achieved through acquiring Constellation’s competitive market operations, but in his interview with the Fortnightly he had seemed antagonistic to the competitive model.

“I think the jury is still out on the benefits of competitive markets,” Hay told us last June. “We haven’t seen significantly lower prices in competitive markets than in regulated markets. In fact, I could argue that you have seen the exact opposite in many cases. It seems the customers are still questioning the benefits of competitive markets.”

Is that the guy you would want to see at the helm of a multi-state competitive energy market operation?