Merrill Lynch

Marginal Utility

Changing the Electric Utility Financial Paradigm

Global capital markets have accommodated the industry with low interest rates and high stock price multiples, but capital markets are fickle. Electrics will be capitalized more like other industrial companies, and less like regulated monopolies.

Transactions (August 2014)

Wisconsin Energy to acquire Integrys in a transaction valued at $9.1 billion; Dominion to acquire the CID Solar Project from EDF Renewable Energy; Landis+Gyr to acquire GRIDiant Corp.; PPL Corporation and Riverstone Holdings LLC to merge merchant power generation businesses into a new company Talen Energy Corporation; plus debt offerings totaling $1.5 billion.

Transactions (October 2013)

Constellation and EdF transfer nuclear licenses to Exelon for $400 million; NRG closes $244 million acquisition of Gregory cogen plant in Texas; Vivint Solar secures $200 million for rooftop solar leases; Virginia Power floats $585 million in bonds; Southern Company issues $700 million; plus equity deals totaling $844 million and debt issues totaling $3.635 billion.

Transactions (June 2012)

Northeast Utilities closes Nstar acquisition; NextEra announces $600 million stock offering; PPL acquires AES power plants; plus debt and equity deals totaling $513 million.

Vendor Neutral

(January 2012) Hawaiian Electric selects Renewable Energy Group to supply biodiesel for combustion turbine; GE signs long-term services agreement with Comision Federal de la Electricidad; Nissan North America selects Coulomb Technologies to provide EV charging infrastructure locations; Siemens agrees to acquire eMeter; plus announcements and contracts involving AES Corp., Maui Electric, KCP&L, and others.

Vendor Neutral

(June 2011) Duke and ATC team up to build transmission lines; AEP installs bioreactor to control selenium emissions; NextEra buys 100 MW of wind from Google; Ocean Power Technologies awards contracts for wave power array; Kansas City picks Elster; BC Hydro picks Itron; plus contracts and developments involving Tres Amigas, Ioxus, Opower and others.

CEOs on Change

Utilities adapt to a shifting landscape.

The U.S. utility landscape is more dynamic and uncertain than it’s been since Thomas Edison and George Westinghouse waged their infamous war over alternating current—and the results might be just as fundamental to the industry’s future.

The Path Forward

In the wake of the banking crisis, utilities lead the way to financial stability.

The back-to-basics trend positioned utilities and other energy companies to lead the way out of Wall Street’s mess. Despite a perfect storm of rising costs and a weakening economy, utilities and lawmakers might start a wave of investments in clean-energy assets and technology. But will Wall Street be ready to finance it?

The Fortnightly 40

(September 2008) Shareholder value remains strong as the Big Build begins. Our fourth annual ranking shows healthy growth in earnings and share prices. But as capital spending grows, dividends are shrinking and equity returns are weakening. Regulatory relationships will separate future winners from losers.