CEO Power Forum: James Ferland, Chairman, President, and CEO of Public Service Enterprise Group
Has the California restructuring debacle and Enron's bankruptcy affected your business strategy?
At a high level, I would say it has reinforced somewhat the view that we've had, that we want to be a diversified company. I can tell you that when I particularly appreciated that was when some of the pure merchant energy companies' stocks were tanking immediately after the Enron bankruptcy. In some cases, maybe some of those reductions in multiples for that sector were legit, maybe they weren't. But it was sort of nice not to have that same kind of carryover effect on our particular business. From that standpoint, it sort of reinforced the benefits of being a company in several elements of the business. Also, I think that the Enron situation and the resulting fallout in the merchant energy sector—and by that, those are the guys I view as pure plays in non-regulated generation only—is probably good for us. Before that happened, the merchant generators' sector was trading at multiples that made it very difficult to compete with them because their cost of equity capital was just a small fraction of ours. Their multiples are actually now lower than a company like ours. One of the fallouts from that has been a very substantial reduction in the amount of new capacity that's going to be added across the country to a considerable extent because some of the merchant folks had some very expansive plans.
Does it worry you that a lot of generation projects are being delayed or canceled, which could create possible shortages down the road?