Posts tagged 'utilities'

Beware the Yieldco

Hedgeye’s Kevin Kaiser is an independent analyst on a lone crusade against the shoddy valuation of capital intensive corporations with limited earnings but with strong dividend payout track records. His question: where exactly is the money coming from?

His biggest beef is with Kinder Morgan, the pipeline operator which recently transformed itself from a Master Limited Partnership into a corporation. But, as Kaiser observes in a new research note, “Yieldco” syndrome could be much more common than that. Read more

Capstone acquires Bristol Water for C$215m

Capstone, the Canadian infrastructure fund, has made its first investment in the UK, buying a controlling stake in Bristol Water for C$215m ($206m), the FT reports. The deal, which values the English water company at C$457m including debt, would be the fund’s second European deal but the first one in the water sector, where there has been a flurry of mergers and acquisitions activity. Agbar, the Spanish water specialist majority-owned by Suez Environnement of France, will retain a 30 per cent stake and has signed a deal with Capstone to provide advice on trends and operational innovations in the industry. It acquired Bristol for £362m ($560m) including debt five years ago. Water has been an attractive sector for infrastructure funds because of its low risk and high growth. The returns in the UK market exceed those in Canada, one person involved in the deal said.

Japanese utilities have a ‘Tepco moment’

A new phase in Tepco’s “BP moment”: just like the whirlpool created by the massive tsunami after the March 11 earthquake, Japan’s biggest electricity provider and operator of the crippled Fukushima nuclear power plant is dragging peers into its own troubled vortex.

Investors’ attitudes to Japan’s other utilities have not been nearly as severe as the scare that has driven Tepco’s share price down 73 per cent since March 11, and further widened its CDS spreads on Monday by 143bps to 473bps (amid fears, as Markit’s Gavan Nolan remarked, that the company “is losing control of the situation”). But it’s still a very worrying sign for anybody involved in Japan’s nuclear power industry. Read more

Euro nuclear, paralysed and paralysing [updated]

A nasty stasis in shares in E.ON, RWE and EDF at pixel time:

 Read more

Duke set for $13bn Progress deal

Duke Energy is in advanced talks to buy Progress Energy, in a stock-based deal worth more than $13bn that would create the largest US power utility and hasten consolidation in the utilities sector, reports the FT. The agreed deal could be announced on Monday, although it still requires approval from state regulators, who have blocked several utility mergers. The merged company would be worth about $36bn; Duke’s market cap was $23.6bn at the end of last week. Bloomberg cites people close to the deal saying that Duke, under chairman and CEO James Rogers, plans to make Progress CEO William Johnson chief of the combined company.

Triple-A utility, Aa3 country

Deutsche Bahn über alles, anyone?

Moody’s has added to the corporate-better-than-sovereign meme, noting in that the ratings of some European infrastructure and utilities companies could outstrip those of their parent sovereign. Sometimes by more than two rating levels, in fact. Read more

Market wets itself over UK QE

Here’s one for the ‘weird QE effects on equities‘ files. One for those already identifying higher inflation expectations even before QE is announced, too.

Presenting the incredibly inflating share prices of UK water companies, as noted by Evolution Securities on Monday (chart via the FT/Reuters): Read more

Tepco and ‘unusual price movements’ in Japan

Question: why would a stable, big Japanese company with huge cashflow, a high credit rating, a dividend yield on its shares of 2.9 per cent and ready access to debt markets — where its bonds trade at yields of under 0.5 per cent — want to launch a straight equity issue of Y555bn, or $6.65bn?

Indeed, many investors and analysts asked the same question after Tokyo Electric Power, or Tepco, Japan’s biggest utility company, announced plans for the monster share issue — the first such issue in nearly 30 years. The lead underwriter for the issue is Nomura, Japan’s biggest broker. Read more

How utilities are just like banks

As we’ve reported before, UK natural gas prices are destined to stay low for the foreseeable future as a slew of  liquefied natural gas cargoes, unwanted elsewhere, is redirected to British shores.

Most cargoes will have originally been intended for the US market, but a boom in alternative natural gas production in the country has now muted demand for imports — releasing a record number of cargoes  into the spot market. Read more