Power

Siemens self-medicates with weak activist tonic

8 May 2019

The $96 bln industrial giant’s plan to slim down by spinning off its power business looks designed to pre-empt a shareholder rebellion. But the new entity’s complex structure and its odd bundle of clean and dirty energy assets could still draw the attention of a pushy investor.

South African power bailout puts consumers on hook

20 Feb 2019

A $4.9 bln government lifeline is the bare minimum needed to keep indebted utility Eskom afloat. Likely union resistance to mass layoffs means consumers will have to swallow higher electricity costs. President Cyril Ramaphosa can only hope hikes are delayed beyond a May election.

Deripaska markdown will persist at En+ and Rusal

28 Jan 2019

The Russian metals groups have been freed from U.S. sanctions. Though their shares have perked up, they still trade below pre-sanctions level. Given the risk of new penalties should previous majority owner Oleg Deripaska exercise control, the valuation gap will linger.

BlueMountain is tardy with PG&E activism

24 Jan 2019

The hedge fund firm wants to oust the California utility’s directors, who are heading toward bankruptcy. It has a point: The hit from wildfires is not yet defined, and PG&E has stumbled in other ways. But BlueMountain is running out of time to rouse bigger, longer-term owners.

Eskom creditors may yet share South Africa’s pain

17 Dec 2018

Plans to fix a $30 bln debt crisis at the state power group hurt everybody but bondholders. Besides a state bailout and tariff hikes, the utility wants to cut a third of its wage bill. Union pressure and weak government finances mean private lenders could have to take a loss too.

South African blackouts mask $30 bln power problem

6 Dec 2018

State giant Eskom is rationing electricity supplies while seeking debt relief from the government. Big staff cuts would shrink losses and help assuage nervous bond investors. That will be tough for President Cyril Ramaphosa, but may be the only way to keep the lights on.

PG&E woes show climate is clear and present danger

14 Nov 2018

The California utility may be to blame for the wildfire that’s claimed 48 lives. Its value has halved and it may run out of cash. The planet’s warming is already worsening fires, floods, and water scarcity. Yet most investors and companies still treat it as a longer-term risk.

Johnson Controls shows value of recharging early

13 Nov 2018

The conglomerate is selling its car-battery unit to a Brookfield-led investor group for $13 billion. The business has been humming but its lead-acid technology risks being overtaken by lithium-ion powered electric cars. That makes private equity a better ownership vehicle.

GE boss could face his own goodwill writedown

12 Nov 2018

The firm’s stock sank anew on Monday despite Larry Culp’s vow to speed asset sales. Repeated failures to draw a line under power woes and other liabilities have shredded GE’s credibility. The new chief risks falling into the same trap, and losing investors’ confidence.

GE’s new boss struggles to find the bottom line

30 Oct 2018

The ailing conglomerate missed sales and earnings estimates and notched a $23 bln loss after a massive power writedown. A 90 pct dividend cut will conserve much-needed cash and shows CEO Larry Culp is serious. Still, there’s little evidence of a turnaround in sight.

ABB belatedly succumbs to industrial revolution

19 Oct 2018

While European heavyweights like Thyssenkrupp and Siemens restructure, the $45 bln Swiss-Swedish group still sits on a largely unrelated power business. Now CEO Ulrich Spiesshofer is finally mulling action, he should opt for a full spinoff rather than a half-hearted partial sale.

Norway power failure a rehearsal for bigger shocks

14 Sep 2018

The 114 mln euros Einar Aas lost betting on energy markets was not enough to sink the clearing house backing the trades. But the damage wreaked by one man implies deeper frailties. An increasingly volatile carbon price would make the commodities market vulnerable to a repeat.

Siemens will pay a price for ducking breakup

2 Aug 2018

The trains-to-turbines group is dividing itself into three main units and holding onto stakes in non-core businesses. It’s a far cry from a GE-style restructuring. A more profitable, smaller company will emerge over time. But its conglomerate discount will take time to narrow.

GE’s small ball merely delays tough decisions

25 Jun 2018

The conglomerate is selling its distributed-power unit to buyout shop Advent for $3.25 bln. It brings CEO John Flannery closer to his divestment target but doesn’t really cut debt or bolster earnings. That will require bigger sales or spinoffs, and probably another dividend cut.

Tax reform puts utilities’ good credit at risk

21 Jun 2018

Debt investors have long favored power companies because their regulated monopoly status provides good assurance of payback. But tax cuts are limiting companies' billing power and their ability to deduct investment spending. Natural disasters add an extra layer of risk.

GE power slump is positive wrapped in negative

23 May 2018

The $130 bln conglomerate warned profit from making turbines won’t grow this year. And demand could remain soft for a while. GE’s sprawl means that as the world goes, so do its businesses. But the irony of slimming down is that fossil fuel dependency just becomes more visible.

Portuguese power bid tests EU’s open door to China

11 May 2018

China Three Gorges is set to bid for the 77 pct of EDP it doesn’t own. The group has been an investor since 2011, but success would place the 11 bln euro utility under Chinese state control. That will add a spark to European Commission plans to better screen foreign investment.

Enel and Iberdrola’s Brazil war lacks restraint

30 Apr 2018

The two companies’ rival bids for Eletropaulo have nearly doubled the market value of Brazil’s top utility in a month, to $1.6 billion. The Europeans want to boost their presence in Latin America’s biggest nation. But the deal is too pricey to create much value for the winner.

Elliott finds another target for its power play

23 Jan 2018

FirstEnergy shares spiked after a $2.5 bln capital injection from the activist hedge fund and others. Elliott is reprising a ploy that made NRG the best performer in the S&P 500 last year. That deal had hiccups though, and the latest one will too. Shareholders should buckle up.

America better at finding natural gas than using it

29 Dec 2017

Booming production has made the country a net exporter. But consumers are on pace to use less electricity from natural gas in 2017. As issues from Atlanta to Florida pressure the grid, shale’s promises of “energy independence” hit policy and infrastructure obstacles.