Utilities

Buffett needs luck for Las Vegas gamble to pay off

30 May 2013

Berkshire Hathaway’s $5.6 bln bet on NV Energy suggests billionaire investor Warren Buffett is coming up short on decent ways to deploy his cash. With utility mergers offering meager synergies thanks to regulators, Berkshire will struggle to cover its cost of capital.

Wave of liquidity engulfs Severn Trent water

14 May 2013

For years bid talk has surrounded the UK’s last listed water utilities. Severn Trent is now in play. A bid could top $14 bln with debt, at 35 pct above the group’s regulated value. That would be rich. Regulation may get tighter. But debt is cheap and funds are eager for yield.

E.ON will struggle to attract a new linchpin

8 May 2013

After years of a declining share price, the German utility’s second largest shareholder has had enough. Statkraft, a Norwegian peer, sold its 4.2 percent stake in E.ON, realising a huge loss. Its willingness to take such pain highlights the bleak prospects for European utilities.

Giant electric utility could net Uncle Sam $20 bln

11 Apr 2013

That’s what the Tennessee Valley Authority might be worth if Washington decides to sell it off. There are lots of caveats, financial and political. But it’s hard to see why the New Deal-era TVA needs to be publicly owned now. And every few billion helps balance the federal books.

Billionaire Batista’s X factor becoming big loser

20 Mar 2013

The Brazilian entrepreneur needs to sell part of MPX, a $3 bln electricity firm, to calm creditors. He borrowed against ventures that went public too early and have slumped 70 pct in value. The prospect of more margin calls is a gloomy one for his creations’ battered investors.

Enel’s 6 bln euro offload highlights its frailty

13 Mar 2013

Selling a few billion euros of non-core assets will help the heavily indebted Italian utility’s balance sheet. But the disposals may also sap earnings. With grinding austerity and pricing pressure hitting Enel’s core markets, the shares are likely to remain weak.

RWE will find it tough to renew its powers

5 Mar 2013

Germany’s biggest utility is in better shape than many seemed to think. RWE beat profit targets and pleased with a decision to sell its oil unit. Medium-term challenges are formidable, though. It will find Germany’s push for renewable energy especially hard to cope with.

Latam minority investors strike back against Enel

21 Dec 2012

The Italian utility tried to foist overvalued assets onto shareholders of Enersis, its Chilean unit, as part of an $8 bln capital hike. Minorities rebelled and with regulatory help forced Enel to restructure the deal. It’s a small but significant victory for Latam shareholders.

E.ON shocker opens era of crippling uncertainty

13 Nov 2012

Investors punished the energy group for saying it wouldn’t reach its outlook for the next three years. Economic gloom along with political and regulatory uncertainty make life uneasy for European utilities - and even harder for German ones. This isn’t about to end soon.

Sandy fiasco reveals investor-customer disconnect

7 Nov 2012

The storm that created up to $50 bln of damage across the East Coast left 8 mln customers without power, and ornery. Politicians are hopping mad, too. Yet the market values of the region’s major power utilities barely took a hit. If regulators do their job, that won’t last.

Cameron right to strike at bamboozling capitalism

19 Oct 2012

The British prime minister’s policymaking is under fire. But his instincts are absolutely right. UK energy utilities along with other companies, and banks, confuse customers where simplicity would aid competition. Government must attack this sort of ugly capitalism.

How many reais needed to screw in a light bulb?

12 Sep 2012

That’s what investors should ask about Brazilian President Rousseff’s plan to slash sky-high electric rates that are restraining economic growth. Power companies are being forced to shoulder most of the burden. Government can afford to pick up the tab on the next round of cuts.

Market could overrule U.S. court on coal pollution

22 Aug 2012

An appeals panel has put the brakes on the EPA’s effort to cut emissions from coal-fired power plants. That could keep the dirtiest U.S. smoke stacks going a bit longer. But at least for now, cheap gas is doing the environmental watchdog’s work, whether judges like it or not.

Hot infrastructure auctions drive down returns

22 May 2012

Investors want big, predictable assets in the less rickety bits of Europe. While debt is cheap, there isn’t much for sale. So auctions like E.ON’s 3.2 bln euro sale of gas grids run pretty hot. Even if the bets are less extravagant than in the credit boom, returns will suffer.

Int’l Power does well to get better buyout from GDF

16 Apr 2012

The power generator’s board has won a 7 pct sweetener from GDF Suez in exchange for agreeing to an $11 bln minority buyout. It’s a decent result for International Power’s 30 pct outside shareholders, given wobbly markets and GDF’s majority.

Int’l Power non-execs have some leverage over GDF

30 Mar 2012

The UK energy firm has had a 6 bln stg approach from GDF for the 30 pct that the French group doesn’t own already. Bid rumours have already effectively added a slim premium to IPR shares. But its independent directors still have some power to push for a bit more.

Monopolies thrive when politicians go short-term

26 Mar 2012

How else to explain the likely approval of a $17.5 bln New England power merger? Northeast Utilities’ incompetence is proven, but dangling a few politically expedient goodies seems to have won authorities over to its NSTAR takeover. Captive customers may lose, but investors win.

Enel woes reflect euro zone’s new normal

9 Mar 2012

Big cuts to the debt-laden Italian utility’s earnings and payout guidance suggest years of tough going in Spain and Italy. The shares are 40 pct off their 2011 highs, but windfall taxes, slack demand and the sector’s lowest dividend yield mean investors’ pain may not be over yet.

Veolia board coup attempt just a bad French farce

23 Feb 2012

Nicolas Sarkozy and Henri Proglio, the former chief of Veolia, are reported to be pressuring the water company’s board to oust current CEO Antoine Frerot. Whatever the latter’s merits, the episode looks to exemplify some of France’s worst political and business habits.

CIC only dips toe into UK with Thames Water stake

20 Jan 2012

As the UK’s chancellor hunts out investors for a $46 billion infrastructure plan, China’s investment in the London utility looks timely. Yet returns on investing in a mature water company are very different from funding risky new projects. Osborne has more schmoozing to do.