Energy

National Grid joins utilities spending spree

24 Feb 2006

While Europe s biggest utilities seem hellbent on a valuedestroying bun fight, National Grid is steadily going about its work in the US. Its mooted $11bn offer for KeySpan makes strategic sense and could create value too. Not all utility firms are mad Empire builders. But the UK group isn't making a continental landgrab. It's mooted $11bn bid for KeySpan would build on what it already has in the US. The deal would make strategic sense and could create value too. But the UK group isn't making a Continental landgrab. It's mooted $11bn bid for KeySpan would build on what it already has in the US.

Suez-GdF looks like unholy alliance

24 Feb 2006

One can see why Suez management or French politicians might want it to jump into Gaz de France s arms to evade a breakup bid from Enel. But a defensive merger with the French statecontrolled gas group is unlikely to be best way of maximising shareholder value.

NRG woos yield-hungry investors

30 Jan 2006

The US power group s $3.6bn highyield bond is the largest deal since RJR Nabisco in 1989. And NRG got good terms from investors. The deal taps investors desire for energy companies, and their need for yield. But it s one that few can emulate.

Gazprom’s mooted bid for Centrica looks premature

29 Jan 2006

Sure, there's some industrial logic in the Russian behemoth taking over the £10bn UK gas distributor. But the timing, in the midst of a AngloRussian spy row and Russia holding Ukraine to ransom on gas, looks politically appalling.

Repsol reserves cut is even worse than Shell’s

26 Jan 2006

Repsol replaces only a fifth of its reserves. Boosting them will require expensive M&A or huge investment. Neither bodes well for returns. The Spanish oil firm has cut its reserves by 25%; Shell cut by "only" 20%. And the Spanish oil firm is in a worse strategic position too.

Iranian nuclear stand-off threatens new oil shock

23 Jan 2006

The Iraq war has left the US weaker. That makes a drawnout crisis more likely. The price of oil already has a $10 premium for political risk. It could easily go higher.

Little upside at British Energy

15 Jan 2006

The UK nuclear power group is a highly geared play on soaring gas prices. But the shares fully discount high gas prices until at least 2008. To justify a higher valuation, gas prices must stay elevated beyond 2008. Given the investment in UK gas import capacity, this is unlikely.

ScotPower hires ex-drinks man to sell itself for more

12 Jan 2006

At least that's how Philip Bowman s surprise appointment to the UK utility looks. What other expertise does Allied Domecq s exCEO bring? Bowman got a rattling auction going for the UK drinks firm in a consolidating market. Scottish Power is in a very similar position.

Europe misses out on oil M&A boom

4 Jan 2006

US oil firms racked up an impressive $110bn of deals in 2005, while European firms managed a meagre $15bn. That's partly because European firms preferred to build reserves through exploration. But pressure is building for megamergers everywhere.

FPL-Constellation deal could spark US utility M&A

20 Dec 2005

Government restrictions destroy pentup value. Their abolition releases it. That is the lesson from FPL s $11bn buyout of Constellation. The recent repeal of an old utility restriction may allow several other utilities and energy traders to unlock value by hooking up too.

Hedge funds score over private equity with Drax IPO

15 Dec 2005

That's significantly more than the maximum £2.3bn private equity suitors were offering. The funds have achieved a £2.6bn enterprise value by floating the giant UK power plant.

Conoco pays royally for Mulva’s ambitions

13 Dec 2005

In the oilthriller Syriana, an American protagonist berates a Middle Eastern prince for squandering his Emirate s oil wealth. The chief of Conoco, JJ Mulva, is doing something similar with the $36bn overpriced takeover of Burlington Resources.

Shell capex boost won’t do much for production

13 Dec 2005

The headline $19bn number looks big. But it's only a $4bn increase. And less than half is on new upstream projects. Much of the rest is just higher costs on existing projects, partly the legacy of its previous poor management.

Conoco makes $30bn bet on Burlington – report

12 Dec 2005

The thirdlargest US oil major is beefing up its natural gas production in the hopes that natural gas prices will stay high. But this won t come cheap Burlington s share price has nearly doubled this year.

E.on right to walk away from Scottish Power

22 Nov 2005

The German utility deserves credit from shelving a potentially valuedestructive acquisition after its 570p a share offer was rejected. Scottish Power is to boost its dividend. But in the absence of another bid, its shares are unlikely to see 570p a share again for some time.

Drax bidders overestimate the lure of cash exit

17 Nov 2005

Normally, investors in formerly bankrupt companies are desperate for liquidity. So it is easy to buy those companies cheaply. Bidders for the UK power station group have been lobbing in lowball offers. But Drax may be a tougher nut to crack.

SSE is likely winner in any Scottish Power deal

7 Nov 2005

Scottish Power will be lucky to extract much of a premium from any bidder, given that it is already overpriced. And E.on runs the risk of overpaying. But SSE is wellplaced to pick up any juicy bits that fall from the table.

Windfall taxes won’t solve energy conundrum

4 Nov 2005

Western governments are in a tizz about energy prices and Big Oil s profits. America s top oilmen will face a grilling by Senators next week Yet historically most supply problems have their roots in domestic problems and poor policy ideas. A windfall oil tax is just one of these.

France takes aggressive gamble on EDF price range

28 Oct 2005

The E8bn privatisation is structurally unappealing and dogged by political risk. But the price range is hardly cautious. At the midpoint, the utility is being offered at no discount to European peers.

Shell shouldn’t build a warchest

27 Oct 2005

The oil giant has recovered its poise after the Watts affair. But investors worry it may address its reserves problem by doing a huge deal. The company is stoking these worries by building a huge warchest. If it wants to win trust, it should hand back more cash to investors.