Utilities

Thames debt rejig is oddly good deal for creditors

25 Oct 2024

The ailing UK water utility wants bondholders to defer repayments and give it an extra 3 bln pounds. Investors defer a messy default now and earn an equity-like return on the new money. And they can hope that PM Keir Starmer will agree to price rises, lowering future losses.

AI sparks only dim odds of nuclear chain reaction

7 Oct 2024

Plans to reopen a Three Mile Island plant have created buzz about an atomic energy comeback. For $1.6 bln, however, Constellation’s site would power just one big data center. The economics may someday compete with solar, but it will take coordination as hard to manage as fission.

Thames creditors face messy flush, or deep rinse

30 Sep 2024

The UK water company is running out of cash and racing to raise equity. A new investor would want a big chunk taken out of its 16 bln pound debt load, which may fall heavily on bondholders who can’t put up new money. Even that may be preferable to a government-led overhaul.

Power grids’ low-wattage resources may spark M&A

13 Aug 2024

European electric utilities have to invest big to meet rising demand. Yet balance sheets are laden with debt and raising equity is tough. Some will have to sell assets, or whole companies. Iberdrola’s $5 bln acquisition of a UK peer at a decent premium could be the first of many.

Thames Water fix is a stretch, but possible

6 Aug 2024

The indebted UK utility’s struggles to raise the 3 bln pounds it needs imply impending doom. But while the details are tricky, there remains scope for the UK to offer guarantees or find a way to haircut creditors. A new investor armed with these could yet make a decent return.

India’s water stress is a growing sovereign risk

29 Jul 2024

Erratic rainfall is one reason the country's economic growth may slow to 7% this year. Too much and too little H2O affects everything, from cities to power plants to farming. Climate change coupled with weak state capacity is making it worse. Yet it's an underappreciated problem.

Britain builds moat around leaky Thames Water

11 Jul 2024

Regulator Ofwat will let UK utilities invest and earn more. That eases the risk that problems at highly indebted Thames Water infect peers. But impacting customer bills carries political risks, and Thames’ ability to attract fresh equity remains in question.

Green spending strain boosts infrastructure buyers

6 May 2024

GIP, soon to be part of BlackRock, is buying Allete, an energy firm that is set to spend over $4 bln on clean power. Listed utilities’ funding costs are rising while green upgrades demand big outlays, a tasty opportunity for infrastructure funds with $350 bln of capital.

Spain’s utility saga calls for tough balancing act

18 Apr 2024

The UAE wants to buy 40% of 22 bln euro Naturgy from its private equity owners. That would usually require a full takeover, but Madrid has form on protecting key infrastructure. Spain will have to balance its desire to retain control with the need not to scare its bidder away.

Thames Water fix requires everyone to take a bath

4 Apr 2024

One way to repair the ailing UK utility is to hike consumer bills. The government could also hose the holders of the group’s 17 bln pounds of net debt. That might make the politics of the sorry saga marginally less toxic – and even give Thames a shot at luring new investors.

AI’s power surge short-circuits longer-term plans

1 Apr 2024

Data centers account for 2.5% of the US grid, and machine learning is supercharging growth. Where and how to build megaplexes consuming as much electricity as a small nuclear plant are the immediate problems, but they’re solvable. Calculating future demand is the real conundrum.

UK’s leaky coffers are Thames Water’s lifeboat

28 Mar 2024

The utility is drowning in $19 bln of debt and may collapse in 2025 if its regulator doesn’t approve higher bills. A nationalisation could be the best solution but the government isn’t flush with cash. Unless PM Rishi Sunak breaks his fiscal rules, consumers will have to pay up.

Europe’s green giant is focusing on safer bets

21 Mar 2024

Iberdrola is upping investment on ageing power grids. The $79 bln Spanish utility is also buying out US unit Avangrid and allocating its biggest chunk of capex to the States. Both bets look likelier to pay off than renewable power and geographies with less generous subsidies.

RWE has a way out of its valuation hole

14 Mar 2024

The $26 bln German power utility has lost 22% of its market value this year. Low gas prices, higher rates and a lingering presence in polluting lignite are reasons why. The first two ought not to persist as headaches, and the last is something RWE could do more about.

Dead power deal shows limits of M&A futurology

2 Jan 2024

Avangrid and PNM have given up on a $8 bln merger after three years of waiting for regulatory approval. Yet investors repeatedly priced the target as if the tie-up were in the bag. Political twists can easily wrong-foot arbitrageurs. Trouble is, such twists may get more common.

Renewable will increasingly mean mostly solar

7 Dec 2023

Cheap green power is eating coal and gas, but solar's price is falling fast. It isn’t an exact wind substitute, so even costly offshore farms have a future. Texas shows the future, where solar now accounts for 7% of generation and has grown 5 times as fast as wind since 2019.

Double defensive gas deal offers relative cleaning

6 Sep 2023

Canadian pipeline firm Enbridge wants to reduce dependence on transporting oil. Dominion Energy wants to concentrate on clean electricity. Selling retail gas distribution businesses for $9.4 bln to Enbridge doesn’t directly reduce emissions. But it does make both look cleaner.

Climate change turns US utilities grimly exciting

31 Aug 2023

Hawaii’s biggest electricity provider is at risk of bankruptcy after wildfires destroyed a town. Increased capital expenditure can mitigate, but not eliminate, damage from storms and heat. Little wonder investors are slowly waking up to the dangers posed by litigious customers.

GE chief’s efforts pay back twice over

25 Jul 2023

Jet engines and turbines are back in demand after years of weakness when CEO Larry Culp could do little but focus on efficiency. The conglomerate is now equipped for better times. So’s the boss, whose extravagant $232 mln bonus – pegged to the share price – is finally in the bag.

UK is in danger of becoming the Nigeria of wind

20 Jul 2023

Ex-PM Boris Johnson wanted Britain to be for green energy what Saudi Arabia is for oil. Yet Vattenfall is halting a key offshore wind scheme, and it’s not clear if the UK will let developers hike prices to offset soaring costs. The more apt OPEC comparison is output-hit Nigeria.