(Source: PRNewswire-USNewswire)
VIENNA, Va., Sept. 2 /PRNewswire-USNewswire/ -- Share values among America's utility, gas and power companies have outperformed the broader market since the financial crisis began one year ago. Maintaining this performance, however, might become more difficult in the months ahead, according to a report published in the September issue of Public Utilities Fortnightly magazine (http://www.fortnightly.com/).
The fifth-annual Fortnightly 40 study, sponsored by Accenture, ranked the four-year shareholder value performance of U.S. investor-owned utilities (IOUs) and other companies active in electric power and gas industries. The C Three Group of Atlanta, which along with Public Utilities
Fortnightly developed the F40 financial model, analyzed the annual reports of 85 companies to compare a series of shareholder-value metrics -- such as profit margin, dividend yield, return on equity (ROE), return on assets (ROA) and sustainable growth.
Companies leading the F40 ranking this year included DPL, Energen and PPL. Ranked among the top 40 for the first time was NRG (32), and returning to the ranking after a year's absence were Mirant (21) and AES (37) -- three companies with heavy exposure in wholesale power markets. Conversely, Alliant and Northwest Natural Gas slipped to the bottom of the F40 after ranking in the high 20s last year.
The F40 metrics -- combined with supplementary 2009 data -- showed the industry remains financially robust despite a substantial decline in stock prices. Cap-ex spending among the Fortnightly 40 companies grew by nearly 30 percent in 2008, topping $49 billion, and the entire industry's cap-ex increased 17 percent to nearly $94 billion. At the same time, equity returns among the top 40 companies declined only slightly, from 15.4 percent in FY2007 to 14.6 percent in 2008.
Notwithstanding these strong figures, economic forces are putting pressure on balance sheets. Kilowatt-hour deliveries have declined rapidly in many parts of the country -- with residential consumption falling by as much as 8 percent in the second quarter of 2009, and industrial sales dropping at double-digit rates. These trends, combined with the costs of ongoing cap-ex programs, pushed the industry's total net cash flow deeper into negative territory, from -$10.2 billion in FY2007 to -$19 billion in FY2008. Yet, despite this decline in free cash, utilities have continued growing their dividend payouts -- albeit at a slower pace in the first half of 2009.
To protect dividends, companies are delaying spending projects and tightening operating budgets. "We've consolidated spending decisions among our plants," said Paul Barbas, CEO of number-one ranked DPL Inc., parent of Dayton Power & Light in Ohio.
