SSE comes off worse in energy M&A short-circuit 17 Dec 2018 The UK energy group’s plan to merge its retail unit with that of Germany’s Innogy collapsed, after a price cap undermined the transaction’s logic. Innogy can still do a deal with new owner E.ON. SSE’s transition to renewables looks murkier, and its generous payout more fragile.
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.
U.S. utilities face decades of perfect storms 17 Sep 2018 Carolina power companies grapple with hurricane damage while a Massachusetts gas firm is reeling from explosions. California’s push for green energy could hurt credit. Even after decades of rising investment, power companies will struggle to strengthen and modernize networks.
Hot summers are least of UK utilities’ problems 12 Sep 2018 SSE’s shares dipped after high temperatures and gas prices forced a profit warning. A cap on tariffs for retail customers will hit the sector further. And all energy companies have to work out how to cope with the falling cost of renewables and competition from new entrants.
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.