E.ON investors underrate green energy risks 13 Nov 2013 Germany’s largest utility has pruned profit guidance again. The dash for renewable energy in Europe’s powerhouse economy endangers E.ON’s business model. Yet a share-price rebound, kicked off in September, goes on. Overly optimistic investors should brace for a rude awakening.
Li Ka-shing’s Hong Kong spinoff fails to energise 30 Sep 2013 The tepid reaction to the tycoon’s plan to list his local power utility suggests there’s little hidden value. The mature unit’s stable cash flows will look less attractive as interest rates rise. It’s hard not to share Li’s conclusion that cash can be put to better use elsewhere.
RWE’s dividend cut vital, but poorly communicated 20 Sep 2013 Germany’s second-largest utility has bowed to the inevitable and slashed its dividend. Deep structural changes of the country’s energy market are mauling RWE’s medium-term profit prospects. While necessary, RWE’s painful actions could have been better stage-managed.
Battered E.ON and RWE still far from bottom 14 Aug 2013 The inexorable rise of renewable energy is fundamentally challenging German utilities’ business model, devaluing past investment and cutting back future profit. E.ON and RWE are just starting a long downsizing. The adjustment will be painful for already suffering investors.
Defence fees at Severn Trent are hard to defend 17 Jul 2013 The British water utility paid its advisers 19 mln pounds for help thwarting a takeover. Severn’s board got what it wanted. But the payout looks generous. How much work does a four-week tussle in a regulated sector, with no formal bid, really require?
Centrica’s UK shale punt is suitably restrained 13 Jun 2013 Britain’s biggest energy supplier will pay up to 160 mln pounds for a quarter of a big shale prospect. The price looks fair. Shale could help the UK offset declining North Sea output, but the opportunity is unproven and barriers to industrial-scale production are formidable.
Bidders’ drip-drip approach sunk Severn Trent deal 12 Jun 2013 The 5.3 bln pound purchase of the British water company is dead. The bidders, LongRiver, say Severn was too cold about a takeover. But they were too rigid on price. The board did the right thing. Starting serious talks without a strong offer is a poor defence strategy.
Outcomes diverge in Severn Trent spat 10 Jun 2013 The UK utility rightly snubbed a third approach at 5.3 bln stg after suitor LongRiver added a small sweetener. Its shares are pricing in a higher chance of deal failure. While LongRiver’s hardball tactics are risky, an agreement is possible. A compromise on dividends could help.
Efficiency revolution would put shale to shame 4 Jun 2013 Even without fancy new technology, better energy efficiency could save Americans 23 million barrels of oil per day by 2050, twice Saudi Arabia’s output. But investments are inadequate, even though they should be profitable today. Blame bad information and skewed incentives.
Severn Trent buyout treads water 3 Jun 2013 The UK utility rejected a raised proposal with a 5.2 bln stg equity value. Borealis’ bid consortium sounds upset. But the limited market reaction, and the measured tone from Severn, suggests the bidders are not too far off a recommendable offer.
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.