RUS | ENG | All
Enter the email or login, that you used for registration.
If you do not remember your password, simply leave this field blank and you will receive a new, along with a link to activate.

Not registered yet?
Welcome!

2020-07-03 11:15:00

RELIABLE UTILITY INVESTMENT

RELIABLE UTILITY INVESTMENT

By Nevelyn Black Writer Independent

ENERGYCENTRALAs the weeks turn into months, post-pandemic concerns are mounting. Despite the current climate, analyst believe utility companies are still a safe bet for investors.  Barring recent events, (PG&E) utility companies are still a reliable investment.  The nature of the business typically provides stability and long-term returns.  Utilities, in general, are exceptional businesses with strong cash flow and sustainable dividends.  Keith Bowman, investment analyst at Interactive Investor, says that many utility companies, have policies committed to growing the dividend at inflation or above, making them very attractive to investors. In the case of utilities, regional monopolies with regulated rates are not a bad thing.  As monopolies, utilities have little competition and regulated rates ensure steady profit margins when all goes smoothly.  Ryan Hughes, head of active portfolios at AJ Bell, says: 'Utilities have long been known for being stable businesses paying reliable dividends and in times of market volatility have proved their worth.' Lately, though, it’s not business as usual.

In the UK, the National Grid warned in its results that profits would be hit by £400million (nearly $500 million US) due to a combination of COVID-19 complications there and here in the states.  Another concern is the growing number of customers unable to pay their energy bill.  Utilities have continued “no disconnection policies” and permitted extensions for customers unable to pay their bill at this time.  To compensate, utility companies are allowed to charge extra to cover potential bad debts. If a utility isn’t making enough money, the local municipality will permit them to raise rates or if necessary, the city will sell bonds to finance the utility. 

In the U.S., Duke Energy Corporation, Brookfield Infrastructure Partners, and NextEra Energy ranked high as safe investments.  Duke Energy serves the Carolinas, Florida and parts of the Midwest.  The utility is also well diversified, using coal, hydroelectric, natural gas, oil, renewable sources, and nuclear fuel to generate electricity.  Headquartered in Toronto, Canada, Brookfield Infrastructure Partners operates several utilities and utility-like businesses that generate predictable cash flow.  Also, high on the list is Florida’s NextEra Energy.  The utility owns a non-regulated competitive energy business that generates predictable income backed by long-term, fixed-rate contracts.  Successfully combining predictable profitability and income generation makes utilities a lower-risk option for investors.  How can utilities stay profitable and attractive to investors when the cost to build and maintain infrastructure is so high? 

Adaptability could be the answer. One approach is to accept a new normal.  Strategies suggested by global management consulting firm, McKinsey & Company, are (1) Resolve to meet the immediate issues, (2) Resilience to meet critical operational demands and to cope with the financial impact of the crisis.  (3) Return, by bringing workers back safely.  (4) Reimagine and reinvent current operating models.  (5) Reform operating environments.  Utility companies’ profitability and adaptability will determine how companies invest.  However, the long-term effects of the pandemic are still unknown but some say that “next to insurance, utilities are a slam-dunk business for any long-term investor.” 

-----

This thought leadership article was originally shared with Energy Central's Utility Management Community Group. The communities are a place where professionals in the power industry can share, learn and connect in a collaborative environment. Join the Utility Management Community today and learn from others who work in the industry.

-----

Log in to read the publication.

An authorized user gets access to four FREE publications per month.

You can also buy a full access to all publications of the site since January 2014.


Earlier:

RELIABLE UTILITY INVESTMENT
2020, June, 22, 12:10:00
U.S. ELECTRICITY CONSUMPTION DOWN
With many office buildings left empty through the summer months, demand for electricity to power offices, as well as restaurants, hotels and music venues is expected to drop significantly.
RELIABLE UTILITY INVESTMENT
2020, June, 9, 17:40:00
U.S. RECESSION
U.S. gross domestic product fell at a 4.8% annualized rate in the first three months of the year. The outcome for the April to June period is expected to show an even worse annualized decline of perhaps 20% or more. The unemployment rate rose from a record low of 3.5% in February, hitting 14.7% in April and 13.3% last month.
RELIABLE UTILITY INVESTMENT
2020, June, 8, 13:05:00
U.S. UNEMPLOYMENT RATE DOWN TO 13.3%
Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate declined to 13.3 percent
All Publications »
Tags: ENERGY, UTILITY, INVESTMENT
Chronicle:
RELIABLE UTILITY INVESTMENT
2020, August, 4, 14:18:00
MINING OF RUSSIA
Mining of Russia 2020 brings together more than 200 senior executives of the key mining companies from Russia and the CIS Name: International Conference & Onsite visit Mining of Russia 2020 Date: 3 - 4 September 2020, Kursk, Russia
RELIABLE UTILITY INVESTMENT
2020, August, 4, 14:17:00
TANK FARMS AND OIL TERMINALS IN RUSSIA, CONFERENCE AND EXIBITION
We are glad to announce that the 15th Technical Conference Tank Farms and Oil Terminals: from Advanced Design to Operational Excellence 2020 is now open. The event will take place on 12-13 November 2020, in Saint-Petersburg.
RELIABLE UTILITY INVESTMENT
2020, August, 4, 14:15:00
ARGENTINA'S DEFAULT $65 BLN
A major grain producer and once one of the world’s wealthiest countries, Argentina fell into its ninth sovereign default in May
RELIABLE UTILITY INVESTMENT
2020, August, 4, 14:10:00
EXXON LOSS $1 BLN
Exxon Mobil Corporation announced an estimated second quarter 2020 loss of $1.1 billion,
RELIABLE UTILITY INVESTMENT
2020, August, 4, 14:05:00
BP LOSS $16.8 BLN
BP Reported loss for the quarter was $16.8 billion, compared with a profit of $1.8 billion for the same period a year earlier,
RELIABLE UTILITY INVESTMENT
2020, August, 3, 12:50:00
OIL PRICE: NEAR $43 TOO
Brent slid 40 cents, or 0.9%, to $43.12 a barrel, WTI was down 46 cents, or 1.1%, at $39.81.
RELIABLE UTILITY INVESTMENT
2020, August, 3, 12:45:00
RUSSIA'S OIL PRODUCTION 9.37 MBD
Russia agreed to cut crude production over May to July by 2.5 million b/d from a baseline of 11 million b/d to 8.5 mil b/d under the OPEC+ agreement.
All Publications »