Utilities

Thames Water’s nationalisation barrier has a leak

3 Sep 2018

The utility is reining in dividends and spending 12 bln pounds to restore ropey infrastructure. Given a Labour government under current opposition leader Jeremy Corbyn might nationalise the sector, caution is wise. But Thames’ inability to cut bills still leaves it an outlier.

What makes Connecticut Water so tantalizing?

6 Aug 2018

SJW is now paying a one-third premium for the staid Nutmeg State utility. It may flush away rival bidder Eversource and stalker California Water. But the investment return will be low. It only makes sense as a way to invest in infrastructure and prepare for a wave of water deals.

Franco-Dutch utility deal muddies U.S. M&A waters

31 Jul 2018

Suez is selling a fifth of its stateside unit to pension manager PGGM for 30 times earnings. The $601 mln transaction looks even pricier than the takeover battles for two other U.S. water utilities. With asset scarcity making the market frothy, buyers risk ending up high and dry.

U.S. water utilities heading for M&A rapids

11 Jul 2018

A four-way merger battle has shaken up the highly fragmented industry meeting in Minneapolis this week. California is pushing smaller utilities together, and energy firms are looking at H2O deals, too. With $4.8 trln of water infrastructure spending needed, bigger looks better.

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.

BT dividend cut would give next CEO room to invest

8 Jun 2018

The telecom group’s boss Gavin Patterson is leaving after nearly five years. Investors have lost roughly 40 percent in that time. His successor may have to cut payouts to fund investment if relations with regulators are to improve. The share price already reflects that risk.

Water M&A mudslinging does no one any favors

7 Jun 2018

A cold war between four utilities is heating up. Frustrated California Water is launching a hostile $1.4 bln bid for local rival SJW. SJW’s preferred Connecticut partner, also in Eversource’s sights, is grudgingly seeking other offers. It may be too late to keep watchdogs happy.

China’s Portuguese power bid may yet lure rivals

17 May 2018

It’s no surprise that EDP rejected a lowball 12 billion euro approach from China Three Gorges. The Chinese state’s effective 28 pct stake in the utility suggests a counterbid has little chance of success. But some European utilities may yet have grounds to get involved.

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.

Water M&A wars leave investors unusually placid

2 May 2018

The four-way fight over SJW’s bid for Connecticut Water is boiling over with accusations, intransigence, governance issues and proxy battles - none of it from shareholders. They’re either taking a surprisingly long-term view, or assuming hostile offers for utilities never work.

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.

Qatar/Exxon love-in makes two types of sense

12 Apr 2018

Deepening its relationship with the Texas-based oil major would tie the Arab state more closely to the U.S. after recent tensions with Saudi Arabia. It also gets Exxon investing in infrastructure. That could open up the global market, to the benefit of both parties.

Italy’s TIM grab gives investors two messy options

5 Apr 2018

State investor CDP may buy 5 pct of Telecom Italia. If it sides with Elliott, the activist fund could take control from top shareholder Vivendi. The French group’s oversight of TIM has been dysfunctional. But protectionism coupled with complex ownership is also unappealing.

Investors can get a natural kick out of water

22 Mar 2018

Huge, costly and time-consuming infrastructure projects dominate plans for solving the world’s H2O issues. But nature-based solutions such as restoring forests and soil can yield quicker results for decent returns. They also come with sustainable-investing bragging rights.

Market tools can slake Cape Town’s water thirst

19 Mar 2018

The South African city’s taps may not run dry this year, but low rainfall, population growth and invasive flora keep the threat alive. Poor governance adds to the risk. Tradable water rights could bypass many of those problems, and set an example for other arid regions.

H2O merger an important drop in $730 bln bucket

15 Mar 2018

That’s how much U.S. water utilities may be worth. Yet a deal creating the sector’s third-largest listed company values it at just $1.9 bln. The fragmented industry needs more tie-ups to cover rising costs and investment needs. Otherwise the country’s water quality could suffer.

German utilities give new setup chance of success

13 Mar 2018

E.ON expects 600-800 million euros of synergies from its mega-asset swap with fellow German utility RWE. Both companies have announced better 2017 results than expected. That puts their carve-up of Innogy on a firmer footing.

German energy carve-up generates good sparks

12 Mar 2018

RWE is splitting its ailing Innogy unit in a 22 bln euro deal with rival E.ON. The former will focus on generating power, while the latter specialises in distribution. A knotty asset swap obscures the value picture. But the plan enjoys stronger logic than previous reshuffles.

How Corbyn could grab British water at little cost

19 Feb 2018

If the Labour leader nationalised utilities at market values, the UK’s gross debt would rise by 80 bln pounds. Yet a not-for-profit model could achieve similar ends at little direct cost to taxpayers. The damage depends on how clumsily a Corbyn government handles the transition.

Suez public sector blowback makes for sorry trend

24 Jan 2018

Shares in the French water group fell 16 percent after a profit warning. Utility-like groups with long-term public contracts typically enjoy a low cost of capital. But having governments as clients is no safeguard, as Veolia and Carillion have already shown.