Utilities

U.S. $12 bln utility coupling lacks spark

31 May 2016

Great Plains Energy’s deal for larger neighbor Westar has the modest premium and coy savings target typical in deals between regulated firms. Even if synergies come in higher than hinted, customers may get any surplus. Investors may be right to worry that the buyer is overpaying.

RWE and DONG at opposite ends of green power shift

12 May 2016

The soon-to-IPO Danish utility DONG embraced renewable energy early. The result is strong growth and healthy returns. Late movers like German RWE are suffering badly. Its shares have more than halved in three years. Capital is leaving the old and dirty, and going into the new.

Financial prospects flicker on $11 bln power deal

9 Feb 2016

Canadian utility Fortis would need some $230 million a year in cost savings or other gains to justify the $1.7 bln premium it’s paying for U.S.-based ITC. The strategic sense in the acquisition doesn’t include obvious synergies. That makes a return for Fortis investors look dim.

Warren Buffett’s solar eclipse will be fleeting

11 Jan 2016

A Berkshire Hathaway utility won a battle over Nevada rates for solar-panel users, prompting Sunrun and Elon Musk-backed SolarCity to pack up. The state’s relatively small 3 pct share of the U.S. market, along with broader industry momentum, means sun power should keep shining.

Playground weaklings give Li Ka-shing bloody nose

25 Nov 2015

Hong Kong shareholders rejected the tycoon’s $12.4 bln bid to merge his listed energy and infrastructure units. It’s another sign institutions in the Chinese territory are increasingly willing to exercise their limited powers. Companies can no longer take support for granted.

Beijing backing for UK nuclear comes at high price

22 Oct 2015

China and France’s EDF are nearing an 18 billion pound N-plant deal at Hinkley. Long horizons make the economics hard to judge, but at current prices Britain is on the hook for 1 billion pounds a year in implied subsidies. The price of Chinese support is fiendish complexity.

German nuclear relief masks deeper power shortage

12 Oct 2015

Shares of E.ON and RWE jumped more than 10 pct as regulators approved the sector’s 38 bln euro nuclear provisioning. But overall prospects remain dismal. Rules favouring green energy production dent wholesale prices. Exposure to carbon-rich lignite is an Achilles’ heel. 

Li Ka-shing’s power deal is at risk of a jolt

29 Sep 2015

The tycoon’s Cheung Kong Infrastructure unit wants to buy cash-rich affiliate Power Assets for $11.6 bln in stock. Investors have the motive and the means to push for better terms. But they need to believe the rewards of a sweetened offer outweigh the risks of Li walking away.

Rob Cox: Immelt pins GE colors to Alstom’s mast

10 Sep 2015

If the revised math actually works, buying the French energy provider is a steal of a deal. GE’s big acquisition also serves as a symbol of its shrewd refocus on industry over finance. On this 14th anniversary of being at the helm, Jeff Immelt is staking his legacy on Alstom.

Li Ka-shing’s power deal is a tidy-up too far

8 Sep 2015

The Hong Kong tycoon wants his CKI unit to buy the rest of $18 bln affiliate Power Assets. Li’s latest restructuring would create a simpler, cash-rich firm with lots of M&A opportunities. But the all-share, no premium tie-up doesn’t look great for Power investors.

Exelon mercifully spared winner’s curse

25 Aug 2015

Local D.C. authorities nixed the power company’s $6.8 bln takeover of rival Pepco. A bidding war against earlier failed Exelon target, PSEG, led to a price that was hard to justify. Such intervention may be a concern, but in this case one set of shareholders gets a helping hand.

Southern’s $12 bln deal could find true north

24 Aug 2015

The hefty 38 pct premium it’s paying for AGL looks rich for the utility sector. Though Southern isn’t giving a synergy figure, hacking out over 6 percent of costs would help justify the price. Previous mergers like Duke’s acquisition of Progress at least suggest it’s achievable.

RWE reform spark smothered by politics

10 Aug 2015

The stricken German utility plans to cut red tape, but it really needs to cut staff. EBITDA per employee has fallen 28 percent since 2010. While rival E.ON has opted for a radical breakup, RWE would struggle to sell tough action to its political shareholders.

Blackstone solar exit plugs into twin deal fads

20 Jul 2015

Stephen Schwarzman’s firm is selling panel-installer Vivint for $2.2 bln after a sizzling IPO last year. Buyer SunEdison will cover part of the 52 pct premium with an asset sale that may pay fat dividends. It will take more than a trendy industry and structure to recoup the price.

Iberdrola’s American dream gets harder to realise

2 Jul 2015

The Spanish utility’s $3 bln takeover of listed U.S. peer UIL has been dissed by the Connecticut regulator. Iberdrola can probably offer concessions to get the deal done. But the costs of doing so risk making its attempt to crack the fragmented American market less attractive.

Water woes could open taps on corporate risk

5 Jan 2015

Two-thirds of the world’s biggest companies are worried about access to water. But few are well prepared for problems. That should change as ways to track and address concerns grow. And if bosses don’t take the initiative, activist investors may force them to.

Hawaii electric-bank conglomerate gets sunny split

4 Dec 2014

The rise of solar power helped force Hawaiian Electric to sell itself to $46 bln utility NextEra. The $3.5 bln deal also puts an end to the Aloha State utility’s anachronistic ownership of a bank. The 15 pct plus surge in HEI’s stock price shows the warmth of investors’ welcome.

E.ON gets better at managing decline

12 Nov 2014

The largest German utility beat expectations in the third quarter but confirmed net profit would fall about 20 pct this year. The group is still hobbled by low energy prices, Germany’s dash to green power and its Russian exposure. It is stabilising, but not yet out of the woods. 

Gas Natural’s Chile deal smacks of empire-building

13 Oct 2014

The Spanish utility will pay $7.6 bln including debt for CGE, Chile’s largest electricity distributor. This increases Gas Natural’s footprint in Latin America, countering weak growth at home. But it is paying more than 10 times 2013 EBITDA with few obvious synergies.

San Antonio plots $3.3 bln U.S. water-war strike

7 Oct 2014

The drought-prone Texas city plans to spend about that much on a project for moving H20 140 miles. It’s the controversial next leg of a strategy for securing enough water to keep business in the home of the Alamo. It’s also part of a national battle for economic survival.