Chief financial officers discuss new strategies and the possibility of further convergence inside and outside the energy industry.
Richard Stavros is Fortnightly's Executive Editor.
With the repeal of the Public Utility Holding Company Act of 1935 (PUHCA) as part of the Energy Policy Act of 2005, the utilities industry is beginning to have a sobering discussion on its own future. What was for decades was just idle speculation today is a very real discussion on what types of consolidation and business strategies will carry the industry forward.
For example, many have said PUHCA repeal would promote consolidation with other parts of the energy industry, or more of the so-called convergence mergers typified by the late 1990s and early 2000s. Although this time around, such convergence mergers, they say, will include oil majors in addition to gas and pipeline companies.
A whole new cast of characters is expected to enter the energy industry—overseas ventures, telecom firms, insurance companies, and financial-services groups.
But even as the future seems to hold boundless opportunity, utility executives and industry experts continue to disagree on what sort of consolidation is right.
Many utilities failed in their diversification efforts related to energy trading, insurance, banking, and the international space. But some oppose this characterization, saying that the utility diversification failures of the 1980s and 1990s were no greater or less than the typical diversification failure that took place in corporate America.