When will utilities see the next round of deals?
With the substantial decline in utility mergers and acquisitions (M&A) activity since the heady days of 2000, it's time to ask when M&A activity might return, if at all. Business combinations provide a potentially important means for a utility to enhance its earning and growth prospects, and one of the few alternatives available to achieve these objectives at an acceptable risk.
Buying Time
Slowly and cautiously, utilities are moving back into growth mode.
The air is buzzing with talk of mergers and acquisitions (M&A). It can be heard in the boardroom and on the trading floor. Bankers hear it, and they see their deal backlog beginning to grow. Fund managers hear it, as they hunt for the best buys in the market before strategic investors snatch them up. Financial advisers and lawyers hear it, too; their phones are ringing more than they have in years.
For The 21st Century
Interviews by
So it begins again. After several financially tumultuous years, executives at many of the nation's top utilities can once again look to the horizon and ask the growth question worthy of a Caesar: "What worlds to conquer?"
Utility executives are emboldened by bulging free cash flows, improved credit quality, lower operations and maintenance costs, favorable regulatory treatment, growing service territories, and increasing demand for power.
Technology Corridor
Energy Storage Systems
How to reduce the cycling costs of conventional generation.
Energy Storage Systems (ESS) can provide significant benefits associated with reduced damage to fossil-fuel power plants if the ESS is used in such as way that it reduces start-ups or load-following/cycling. Though those benefits may not be well known, understood, or documented, they are real and ascertainable.
Business & Money
After FERC's Market Power Ruling:
Will financiers dominate the market?
The recent approval by the Federal Energy Regulatory Commission (FERC) of its "interim" market power screen and policies on investor-owned utilities (IOU) affiliate transactions is changing the market dynamics for buying and selling generation assets. Yet, while the market test has drawn plenty of comments and complaints, the long-term effects are still uncertain.
Commission Watch
IOUs, RTOs duke it out over standardization.
Have regional transmission operators (RTOs) and independent system operators (ISOs) asked for excessive levels of credit from customers, to the extent that the burdensome requirements foreclose full market participation by competitive entities? The Federal Energy Regulatory Commission (FERC) must face that difficult question as it investigates whether to institute a rulemaking on credit-related issues for service provided by ISOs, RTOs, and transmission providers.
Perspective
A Year After the Blackout:
Grid reliability is still at risk unless the industry quickly takes action.
Power Measurement
What's causing price volatility, and will it last?
Coal markets have changed dramatically in the last year, but uncertainty lingers over how permanent the changes will be. After relative stability in the 1990s, coal markets, like other energy commodities, have become increasingly volatile, although high prices should not be confused with increased volatility.
People
New Opportunities:
The California Public Utilities Commission (PUC) named Steve Larson executive director. Larson most recently was executive director of the California Energy Commission and chief deputy director of the department of finance.
PG&E Corp. elected Leslie H. Everett senior vice president and assistant to the chairman. PG&E Corp. also elected Russell M. Jackson senior vice president, human resources.
Frontlines
Imported natural gas contains more Btus and fewer impurities than the domestic variety, raising questions for LNG development.
It started as a small problem that was supposed to stay small. When Federal Reserve Chairman Alan Greenspan called for a global natural gas market in 2003, the industry knew inherently that the quality and composition of natural gas imported from places like Qatar and Nigeria would vary from the gas used domestically in the United States.