Fortnightly Magazine - October 2005

Utility M&A: How Many Deals, and How Soon?

By opening the field to far-flung deals, PUHCA’s repeal changes the merger game.

The repeal of the 1935 Public Utility Holding Company Act has attracted a surprising amount of attention in the business and consumer press. But while some analysts predict a wave of utility M&A activity, others are more sanguine about the change.

Following Up on a Capital Performance

Utility stocks have outperformed the broader market. Can the industry deliver a show-stopping second act?

The utility sector has been one of the best performing sectors in the equity capital markets for more than two years. In many respects, this has been a case of the rising tide lifting all ships.

The Energy Policy Act of 2005: Two Views

What the legislation says about a national strategy.

Now that the Energy Policy Act of 2005 has had a chance to sink in, a review of the bill's perks and pork is in order. Supporters of the 1,724-page piece of legislation laud it as a triumph of job-creating bipartisanship that attempts to shore up our energy supply, while detractors call it a gargantuan giveaway to a well-heeled industry.

A Welcome Truce in the Electricity Wars

Let's enjoy this brief period of diminished acrimony before implementation of this landmark law.

In a time of record high gasoline prices, war, and increasingly shared global climate concerns, it is lamentable that the Energy Policy Act of 2005 does so little to address these critical issues. Within the narrower context of policies primarily affecting the electric power industry, however, this is a much more significant piece of legislation, and it includes a few accomplishments bordering on the extraordinary.

A Low-Voltage Energy Bill

While a few provisions are worth embracing, most of its 1,724 pages represent a waste of good timber.

After four years of legislative trench warfare, contentious legal wrangling, and heated partisan rhetoric, President Bush finally got what he wanted—a really big energy bill. What he did not get, however, was an internally consistent "national energy strategy." Examination of the legislation reveals that its title—the Energy Policy Act of 2005—is less descriptive than the title popularized by Sen. John McCain: the No Lobbyist Left Behind Act of 2005.

Beyond Sarbanes-Oxley

Energy Trading & Risk Management: How to evaluate risk and improve decision-making capabilities.

With a heightened focus on risk management, it has become increasingly clear that traditional risk-management approaches do not adequately identify, evaluate and manage risk. An ERM approach integrates risk management with existing management processes, identifies future events that can have both positive and negative effects, and evaluates the effectiveness of strategies for managing the organization's exposure to those possible future events. ERM transforms risk management to a proactive, continuous, value-based, broadly focused, and process-driven activity.

By Executive Decision

Energy Trading & Risk Management: A better framework for making decisions is required to ensure earnings stability and shareholder value in the utilities industry.

Although utilities are refocusing attention on their traditional utility businesses, it is clear that the traditional utility decision-making framework is not sufficiently robust to meet the needs of today's utility executive. An effective executive decision framework provides better answers in the complex utility environment that exists today.

The Cost of Katrina

Debate continues on how to safeguard America's energy infrastructure.

In the wake of Hurricane Katrina, the central question: Could any of this have been avoided? Many experts believe that the new authority given to FERC to enforce mandatory reliability standards, as per the Energy Policy Act of 2005, will bring greater transparency to the process of protecting critical infrastructure.

People

(October 2005) Xcel Energy named Jacob P. Mercer assistant treasurer for the utility and its operating subsidiaries. Portland General Electric appointed Bill Valach director of investor relations. Federal Energy Regulatory Commission Chairman Joseph T. Kelliher appointed John S. Moot as the commission's general counsel. PJM Interconnection has realigned responsibilities among five executives. And others...

What Is Your Power Portfolio Really Worth?

Change is the only certainty in today’s market.

The past year has allowed the North American power sector to continue its recovery, but it has been a treacherous time for investing. Asset values, and the value of their associated debt instruments, are being driven in the short term by an extreme fuel market and in the long term by a back-to-basics mindset among electric utilities. Still, asset valuations in most markets are not yet at replacement costs, leaving current investors with a residual level of risk.

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