Greening IOU Equities

Deck: 

Low-carbon strategies are yielding rewards for shareholders.

Fortnightly Magazine - March 2008
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2007 proved to be a strong year for utility stocks, with the Dow Jones Utility Index outpacing the Dow Jones Industrial Average by 10 percent (16 percent vs. 6 percent). This is a reversal from 2006—the first year the Industrials beat the Utility Index since 2003.

There is a story behind every company’s individual performance; however, compared to previous years, which were characterized by such broad industry strategies as back-to-basics and attempted mega-mergers, 2007 cannot be characterized by any one dominant strategy or direction by investor-owned utilities. In 2007, two IOU acquisitions by private equity groups were announced: TXU by KKR, TPG and others (closed in October), and PSE by a Macquarie-led investor consortium (still pending). The year also saw the acquisition of Energy East by a major foreign player, the Spanish utility giant Iberdrola, S.A. (still pending). However, only one traditional M&A transaction went forward, and a relatively small one at that: Aquila by Great Plains Energy (still pending).

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