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A Capital Problem: Financing the Next Big Build

As rate disallowances become more commonplace and capital requirements expand, infrastructure development will come with a higher price tag.

Fortnightly Magazine - October 2006

Verde nuclear plant near Phoenix.

“Any commission hates surprises,” Bishara says. “If you are forthcoming and predictive with regulators, they will be more friendly to you than if you come in seeking recovery after you have spent the money.”

With the ghosts of much bigger nuclear disallowances still haunting the industry, utilities wisely are exercising caution in pursuing any big capital expenditures. “Any large investment will put stress on your credit rating,” says Kind of Banc of America Securities. “Large projects have a long lead time, and they can’t start bringing cash in the door until they are completed. Don’t assume the regulators are behind you until you have figured out, preferably upfront, how the deal works and [that] you’ve addressed accountability for risk.”

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