Post by Atlantis5 on May 7, 2008 8:28:28 GMT -7
With our changing world, must go also, the search for opportunities. In as much to the value difference at present, that being between the euro and the dollar, so as an opening opportunity that must not be ignored, and that is European expansion into the North American market.
At present there is a beginning of a vacuum in the fragmented US power utilities of dis-unity. In as such, as also declining revenue reserves and power base of income/out going resources for energy purchase/resell and declining profit margins.
The following is a lay out of a possible blue print for progress.
International-SPIEGEL ON LINE-Nachrichten
05/07/2008 11:52 AMTRANS-ATLANTIC SHOPPING SPREE
Overseas Utilities Look to the US
By Mark Scott
Top European power companies such as National Grid are expanding across the Atlantic, attracted by good earnings and regulatory stability.
European power companies view the huge and fragmented US utilities market as a good opportunity to expand their business.
Residents of New York, Maine, and Houston have something in common they may not realize: When they pay their electric bills each month, the money ends up in the coffers of some of Europe's largest utilities.
From Britain to Germany to Portugal, big producers and distributors of gas and electricity are looking for growth by expanding out of their home markets. One of the juiciest opportunities lies across the Atlantic, in the huge and fragmented US utilities market, where there are still about 60 separate operators ranging in size from rural collectives to giants like Pacific Gas & Electric.
The move stateside makes sense for the Europeans. Utilities such as France's Électricité de France and Germany's RWE already have scooped up smaller local competitors over the last 10 years, leaving the continent dominated by a handful of companies. Often shielded from foreign rivals by local governments, the companies now have few options left in Western Europe to invest their expanding capital reserves and satisfy shareholders pushing for profit growth.
US Has Most Opportunities
The US also offers some unique advantages. Analysts say the market is still crying out for consolidation, despite a decade of mergers that already has halved the number of utility players. Plus, the US remains more open to foreign ownership than some other growth markets, such as Russia and China, and has a track record of regulatory stability that companies value in making long-term investment decisions.
"The US is the most opportune place for European players to expand," says John McConomy, a partner in the U.S. Power and Transaction practice of PricewaterhouseCoopers. "They're cash rich, already consolidated in Europe, and have a good track record at generating revenues, particularly from renewables."
The European push into the US may face a few snags along the way. Any would-be acquirer must get approval from federal, state, and local regulators, a complicated task that already has delayed a $4.5 billion takeover by Spain's Iberdrola of electricity and gas provider Energy East, based in New Gloucester, Maine. Although the US market is stable and safe, it's also relatively slow-growing, with annual revenue increases often as low as 1 percent. And with utility earnings typically capped by regulators, the business could become less attractive if lawmakers force utilities to ramp up their investment in costly renewable technologies.
Value of M&A Transactions
So far, these potential drawbacks aren't slowing the mergers and acquisitions wave. According to PwC, the number of US electricity and gas deals rose 15 percent last year, to 146, and the value of M&A transactions soared 61 percent, to $87.5 billion despite the second-half credit crunch.
The $43.8 billion private-equity-led acquisition of Texas utility TXU dominated last year's activity, but European players also got in on the action. Portugal's Energías de Portugal, for example, paid $2.3 billion in May, 2007, for Houston-based Horizon Wind Energy, and Germany's E.ON forked out $1.4 billion in October, 2007, for the North American operations of Irish renewable company Airtricity.
Few European companies have embraced the US market as wholeheartedly as Britain's National Grid, which grew out of the privatization of Britain's energy sector in the 1980s. Specializing in electricity and gas transmission and distribution, the dual-listed company first crossed the Atlantic in 2000 when it gobbled up a string of small utilities in New England. National Grid generated 50 percent of its $17.2 billion in 2007 revenues from its New England businesses.
National Grid upped the ante last year, paying $7.3 billion for Brooklyn's KeySpan and its 7 million customers across New York, Massachusetts, New Hampshire, and Rhode Island. After the deal, National Grid jumped to the second-largest player in the US by number of customers, and the largest company in the Northeast in both electricity and gas transmission.
According to Tom King, National Grid's executive director of electricity distribution and generation and the former president of PG&E, the company's ability to navigate the local regulatory minefield has been key to its success in North America. That has involved everything from calming local concerns about the environmental impact of new facilities to winning over skeptical state regulators who first balked at a European company buying domestic assets. "Understanding the US culture has been critical," he says.
Going Green Could Undermine Profits
Now National Grid is on the lookout for further acquisitions. While it won't comment on possible deals, the company wants to increase its footprint in the US by 25 percent over the next four years through organic growth. "There's real opportunity to create value," says Nick Winser, National Grid's director of British and US transmission operations.
The biggest question about continued US expansion for European utilities is the possibility that pressure to go green could undermine future profits. Most US jurisdictions enforce stringent rate-of-return caps that force utilities to return profits to customers if they exceed yearly targets. That helps prevent monopoly profit-taking, but can throttle risky investments in new technologies -- especially renewables such as wind and solar.
These profit restrictions also could lead European players to turn their attention to less stable but faster-growing markets in Eastern Europe and Russia. In 2007 alone, five of the 10 largest electricity and gas deals involved Russia companies. E.ON, for instance, paid $8.4 billion in September, 2007, for Russian energy company OGK-4, and Italy's ENEL spent $6.2 billion in June, 2007, for utility OGK-5.
Looking at Riskier Markets
Doug King, vice-chairman of the energy, infrastructure, and utilities team for Britain at Deloitte Consulting, figures such deals can offer rates of return as high as 7 percent to 8 percent, vs. the 1 percent to 2 percent typical for US acquisitions. With that much upside potential some European utilities are willing to risk their capital in a country with a track record of regulatory uncertainty. "The Russian market is huge," King says. "Unlike other parts of the economy, investing in the Russian utilities sector seems to be acceptable."
That said, recent skirmishes in Russia's oil and gas extraction sector have demonstrated that the rules of the road can shift quickly for foreign investors. That may persuade European utilities to forgo the potential riches of the East for the safer, more stable profits on offer in the US. Cash-rich and hungry for growth, the US market may be just what's needed to keep Europe's utilities powering ahead.
Charles
At present there is a beginning of a vacuum in the fragmented US power utilities of dis-unity. In as such, as also declining revenue reserves and power base of income/out going resources for energy purchase/resell and declining profit margins.
The following is a lay out of a possible blue print for progress.
International-SPIEGEL ON LINE-Nachrichten
05/07/2008 11:52 AMTRANS-ATLANTIC SHOPPING SPREE
Overseas Utilities Look to the US
By Mark Scott
Top European power companies such as National Grid are expanding across the Atlantic, attracted by good earnings and regulatory stability.
European power companies view the huge and fragmented US utilities market as a good opportunity to expand their business.
Residents of New York, Maine, and Houston have something in common they may not realize: When they pay their electric bills each month, the money ends up in the coffers of some of Europe's largest utilities.
From Britain to Germany to Portugal, big producers and distributors of gas and electricity are looking for growth by expanding out of their home markets. One of the juiciest opportunities lies across the Atlantic, in the huge and fragmented US utilities market, where there are still about 60 separate operators ranging in size from rural collectives to giants like Pacific Gas & Electric.
The move stateside makes sense for the Europeans. Utilities such as France's Électricité de France and Germany's RWE already have scooped up smaller local competitors over the last 10 years, leaving the continent dominated by a handful of companies. Often shielded from foreign rivals by local governments, the companies now have few options left in Western Europe to invest their expanding capital reserves and satisfy shareholders pushing for profit growth.
US Has Most Opportunities
The US also offers some unique advantages. Analysts say the market is still crying out for consolidation, despite a decade of mergers that already has halved the number of utility players. Plus, the US remains more open to foreign ownership than some other growth markets, such as Russia and China, and has a track record of regulatory stability that companies value in making long-term investment decisions.
"The US is the most opportune place for European players to expand," says John McConomy, a partner in the U.S. Power and Transaction practice of PricewaterhouseCoopers. "They're cash rich, already consolidated in Europe, and have a good track record at generating revenues, particularly from renewables."
The European push into the US may face a few snags along the way. Any would-be acquirer must get approval from federal, state, and local regulators, a complicated task that already has delayed a $4.5 billion takeover by Spain's Iberdrola of electricity and gas provider Energy East, based in New Gloucester, Maine. Although the US market is stable and safe, it's also relatively slow-growing, with annual revenue increases often as low as 1 percent. And with utility earnings typically capped by regulators, the business could become less attractive if lawmakers force utilities to ramp up their investment in costly renewable technologies.
Value of M&A Transactions
So far, these potential drawbacks aren't slowing the mergers and acquisitions wave. According to PwC, the number of US electricity and gas deals rose 15 percent last year, to 146, and the value of M&A transactions soared 61 percent, to $87.5 billion despite the second-half credit crunch.
The $43.8 billion private-equity-led acquisition of Texas utility TXU dominated last year's activity, but European players also got in on the action. Portugal's Energías de Portugal, for example, paid $2.3 billion in May, 2007, for Houston-based Horizon Wind Energy, and Germany's E.ON forked out $1.4 billion in October, 2007, for the North American operations of Irish renewable company Airtricity.
Few European companies have embraced the US market as wholeheartedly as Britain's National Grid, which grew out of the privatization of Britain's energy sector in the 1980s. Specializing in electricity and gas transmission and distribution, the dual-listed company first crossed the Atlantic in 2000 when it gobbled up a string of small utilities in New England. National Grid generated 50 percent of its $17.2 billion in 2007 revenues from its New England businesses.
National Grid upped the ante last year, paying $7.3 billion for Brooklyn's KeySpan and its 7 million customers across New York, Massachusetts, New Hampshire, and Rhode Island. After the deal, National Grid jumped to the second-largest player in the US by number of customers, and the largest company in the Northeast in both electricity and gas transmission.
According to Tom King, National Grid's executive director of electricity distribution and generation and the former president of PG&E, the company's ability to navigate the local regulatory minefield has been key to its success in North America. That has involved everything from calming local concerns about the environmental impact of new facilities to winning over skeptical state regulators who first balked at a European company buying domestic assets. "Understanding the US culture has been critical," he says.
Going Green Could Undermine Profits
Now National Grid is on the lookout for further acquisitions. While it won't comment on possible deals, the company wants to increase its footprint in the US by 25 percent over the next four years through organic growth. "There's real opportunity to create value," says Nick Winser, National Grid's director of British and US transmission operations.
The biggest question about continued US expansion for European utilities is the possibility that pressure to go green could undermine future profits. Most US jurisdictions enforce stringent rate-of-return caps that force utilities to return profits to customers if they exceed yearly targets. That helps prevent monopoly profit-taking, but can throttle risky investments in new technologies -- especially renewables such as wind and solar.
These profit restrictions also could lead European players to turn their attention to less stable but faster-growing markets in Eastern Europe and Russia. In 2007 alone, five of the 10 largest electricity and gas deals involved Russia companies. E.ON, for instance, paid $8.4 billion in September, 2007, for Russian energy company OGK-4, and Italy's ENEL spent $6.2 billion in June, 2007, for utility OGK-5.
Looking at Riskier Markets
Doug King, vice-chairman of the energy, infrastructure, and utilities team for Britain at Deloitte Consulting, figures such deals can offer rates of return as high as 7 percent to 8 percent, vs. the 1 percent to 2 percent typical for US acquisitions. With that much upside potential some European utilities are willing to risk their capital in a country with a track record of regulatory uncertainty. "The Russian market is huge," King says. "Unlike other parts of the economy, investing in the Russian utilities sector seems to be acceptable."
That said, recent skirmishes in Russia's oil and gas extraction sector have demonstrated that the rules of the road can shift quickly for foreign investors. That may persuade European utilities to forgo the potential riches of the East for the safer, more stable profits on offer in the US. Cash-rich and hungry for growth, the US market may be just what's needed to keep Europe's utilities powering ahead.
Charles