Utilities stay the course in a volatile market.
Michael T. Burr is Fortnightly’s editor-in-chief. Email him at burr@pur.com.
This has always been a complex industry.
Many factors drive the successes and failures of the companies in the U.S. power and utility business. But today the industry faces historic challenges and complexities on almost every front—from technology to regulation to business strategy.
Ironically, the one area where utility companies seem to be enjoying relative tranquility is also the area where uncertainty has its greatest effect: finance.
It’s a truism that investors hate uncertainty, but uncertainty is a relative term. Amid the raging sea that is Wall Street these days, utilities represent a safe haven, with balance sheets based on steady cash flow and steel in the ground. As a result utilities have maintained easy access to low-cost capital, even in the worst of times (see Figures 1 through 3).
At the same time, however, utilities and power companies face serious headwinds that will affect their future business prospects. To learn how banks and investors view these factors, Fortnightly spoke with eight finance executives and two industry lawyers: