Blackstone and NRG acquire Dynegy assets; Constellation grabs Boston Generating; Exelon gets Deere Renewables; plus details on nearly $7 billion in bond offerings during the month of August, including: a two-tranche, $2 billion issue by Chesapeake; NRG’s $1.1 billion flotation; and major issues from Sempra, Edison International, FPL, Detroit Edison, Dominion and others.
Utility deals resume after 18 months of austerity.
Utilities are taking advantage of a sweet spot in the capital markets, pre-funding and refinancing at record low rates. But cheap money won’t resolve overhanging uncertainties preventing cap-ex projects and M&A deals. Greater certainty in America’s economic and policy outlook will clear a path for strategic change.
Do regulatory and economic trends favor industry mergers?
Now that some new major transactions have emerged, and financial recovery appears slowly moving forward, utility mergers are beginning to appear likely again. Although regulatory hurdles still impede new transactions, some changes at the federal level are reducing concerns about market power and competition. Plus, changing market conditions and new compliance requirements are strengthening the case for scale economics.
Volatile markets call for alternative financial models.
Should the power industry adapt its approach to capital markets in this environment? The answer, of course, is yes. Multiple frameworks are necessary to establish a power company’s or project’s current cost of capital, especially under volatile capital market conditions. The analyses reveal that in today’s capital markets, it is critical to balance or combine the alternative approaches to the cost of capital in order to develop a long-term view.
AGL Resources created a new office of technology and environmental sustainability, to be headed by Ira Pearl as v.p. Jay Sutton is promoted to v.p., engineering and supply chain services at AGL’s Florida City Gas and coastal Georgia subsidiaries. Melvin Williams is promoted to general manager, Florida City Gas and coastal Georgia. And others...
State GHG policies confront federal roadblocks.
So far, states have taken the lead in carbon-control strategies. These state actions, however, could lead to constitutional conflicts—as recent court battles demonstrate. Only the U.S. Congress can regulate interstate trade, so states must step carefully in controlling carbon leakage.
Risk avoidance drives utility stock performance.
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.
El Paso Electric (EPE) selected David W. Stevens as CEO. DPL Inc. promoted Frederick J. Boyle to senior vice president, CFO and treasurer of DPL and its principal subsidiary, The Dayton Power and Light Co. Great Plains Energy named Todd Kobayashi v.p., strategy and risk management. Consumers Energy promoted Richard J. Ford to vice president of energy delivery. And others...
Public companies face rising pressure to disclose climate-change risks.
Regulation of greenhouse-gas (GHG) emissions and other efforts to control these growing environmental concerns increasingly are impacting businesses, and investors are seeking more and better information on climate-change risks to make informed investment decisions.