The industry’s slow-and-steady pace of mergers seems to be picking up speed, as larger and well-positioned players overtake smaller and weaker targets. Realizing the greatest value from consolidation requires companies to assess their strengths and weaknesses and focus on performance improvement—both before and after a deal gets done.
An alternative measure of performance - not based on dividends, earnings growth or P/E ratios.
How to place a value on a utility company? That is the question.
The traditional models no longer work very well. Dividend discount models will not work well if utilities cut dividends and buy back stock to return capital to the shareholders. Earnings growth offers no reliable performance gauge either, as utilities acquire or divest large amounts of capital. Restructuring charges often become necessary to shift resources to their best use.
Agustin Ros, John L. Domagalski, and Philip R. O'Connor
Investors are taking stock
of utility exposure to price competition.The utility trade press and even the general financial press have featured the views of regulators, utility executives, legislators, and various consumer advocates on the stranded-cost question. Stranded costs easily represent the most contentious issue facing the electric industry as it moves to an era of competition.
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