Electric Utilities Look to Mergers & Acquisitions to Keep Dividends Stable
January 11 2011 - 8:46AM
Marketwired
To combat rising costs, companies in the Electric Utilities Sector
have been looking to mergers and acquisitions to keep profits
steady and maintain their healthy dividends. Stricter environmental
regulations require that any new power plants built that are large
enough to produce 75,000 tons of carbon dioxide a year must use the
best available control technology, which is expected to add
significantly to operational costs. Mergers and acquisitions help
grow a company's size, allowing it to better afford these rising
costs. The Bedford Report examines the outlook for companies in the
Electric Utilities Industry and provides research reports on Duke
Energy Corporation (NYSE: DUK) and Constellation Energy Group, Inc.
(NYSE: CEG). Access to the full company reports can be found at:
www.bedfordreport.com/2011-01-DUK
www.bedfordreport.com/2011-01-CEG
Yesterday, Duke Energy announced that it has agreed to buy
Progress Energy for $13.7 billion in stock. Pending approval from
regulators in North and South Carolina, the deal will create the
largest US power company. Analyst consensus is that the new
company's larger size will be more able to afford replacing aging
transmission infrastructure and old power plants. Duke Chairman Jim
Rogers says that in the next 5 years the new company would see
savings in the Carolinas between $600 million to $800 million due
to the benefits of combining their fuel costs and delivery
systems.
Perhaps standing out most for investors are remarks from Rogers
that the deal would allow the company to increase its dividend.
According to Rogers, "It really enhances our ability to grow the
dividend going forward." Rogers says Duke would like to see its
dividend grow at a slightly less rate than its earnings.
The Bedford Report releases regular market updates on the
Electric Utilities Industry so investors can stay ahead of the
crowd and make the best investment decisions to maximize their
returns. Take a few minutes to register with us free at
www.bedfordreport.com and get exclusive access to our numerous
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While analyst consensus is that the deal has a good chance of
winning approval, be forewarned that state regulators have rejected
proposed deals in recent years that would have created utility
giants. In 2006, Constellation Energy and FPL Group abandoned
merger plans while in the same year Exelon and PSEG also failed to
complete a deal.
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