Business & Money

Wall Street bankers say utilities are not effectively telling their story.

How do you value an investor-owned utility? Ever since the Enron debacle, the credit crisis and the economic downturn, many in the investment community say that there exists a need for utilities to better communicate their business vision and corporate model-particularly now that the economy is headed into an economic upswing and utilities will have to compete with higher-yielding financial instruments such as U.S. treasuries, or competing equities with higher-paying dividends.

Furthermore, bankers say that it is not that investors and analysts necessarily don't understand the risks, but that up and down Wall Street there are varying levels of how well the utility industry is understood. Also, these Wall Street experts say, industry regulation and regulators need to provide more clarity about the utility business in areas such as wholesale markets and transmission.

Joseph S. Fichera, chief executive officer of Saber Partners, LLC, an investment bank boutique, explains that many of those who trade equity and debt on Wall Street don't have a clear understanding of the fundamentals, and as a result this causes a lot of volatility in utility financial instruments and how investors perceive the business.

"I would say that many [equity and debt traders on Wall Street] have a minimum level of experience, many don't know the difference between a megawatt, kilowatt, or giga-watt, so what do they trade on?"