Utility companies to continue mergers and acquisitions

See on Scoop.itGreen Energy Technologies & Development

Mergers and acquisitions in the U.S. electric utilities industry will maintain a steady pace over the next few years.

Duane Tilden‘s insight:

>Slower load growth is causing utilities to look beyond their service territories. Load growth has been moderating in recent years primarily because of greater energy conservation and efficiency, increased distributed generation and the 2008 – 2009 economic downturn. These growth trends have pushed some utilities to look beyond their service territories for additional load growth in areas that are growing faster than the national average.

Expanding regulated businesses and diversifying operations reduce risk profiles. Many utilities look to expand their regulated businesses to increase the stability and predictability of cash flows, while also maximizing operational efficiency and spreading operating and maintenance costs over a wider customer base.

Since many utilities are completing or currently at the peak of their capital spending cycle, they will look to diversify their business and attempt to identify new avenues of growth to increase their regulated asset base and earnings. Larger deep-pocketed utilities will also be better positioned to handle future capital expenditure cycles, including increasingly stringent environmental mandates.

Decline in ROEs will spur additional cost reductions, which can be achieved through merger synergies. Falling returns on equity (ROEs) means utilities are looking at consolidation to realize additional cost savings through operational synergies and reduced overheads.<

See on www.elp.com


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