Stocks / Equity Markets

Exelon to buy Constellation Energy, Williams Partners buys interest in Gulfstream interstate gas pipeline system, Macquarie Energy enters purchase agreement for Oak Solar project, and others.

Northeast Utilities buys NStar in $4.3 billion stock deal; Toyota Tsusho buys into Oyster Creek Cogeneration; ITOCHU buys into wind farm; Atlantic Power buys wood-fired plant from ArcLight; plus equity and bond deals totaling nearly $3 billion.

Utility stocks historically have been a safe haven, a stable, long-term investment for widows and orphans. However, with banks collapsing and the economy falling into a recession, utility stocks as a whole recently have performed poorly, with our portfolio of 75 companies losing $200 billion in market value in 2008.

(June 2008) As fossil fuel prices continue increasing and alternative energy gathers momentum, the energy and utility industries can expect to see continued interest from private-equity firms. Over the last five years, record levels of private-equity investments have been used to buy power plants, as well as other utility assets and energy product manufacturing facilities. These once-overlooked industries suddenly are hotspots for private-equity investment.

Low-carbon and “green” strategies have begun delivering returns for utility shareholders. Whether a company ultimately wins or loses depends on how markets are pricing the risks of possible carbon-control regimes.

Analysts: Down on utilities. Is the party over? That’s the tough question posed in a research note by Wachovia equity research analyst Samuel Brothwell.

Although total revenues were up by almost 5 percent for the third quarter of 2006 over Q3 2005, operating income and net income were up by 22.82 percent and 80 percent, respectively.

Although compensation and retention always have been challenges for utilities and other companies not traditionally involved in trading, the advent of hedge funds and other non-energy-based participants has intensified the problem.

A defense of the total return to shareholders (TRS). Our authors use TRS as the bottom-line performance indicator, and come up with a number of performance insights.

An unexploited benefit of renewable energy is the predictability of operating costs over the long term. A renewables operator knows today how much it will cost to produce energy decades in the future. This future price certainty has a value that can be transferred to electricity buyers or other market participants. How much value can a renewable-plant operator capture from selling long-term call options, given several future price and volatility scenarios? What will be the cost and benefit to an individual buyer or seller?