Utilities’ ability to stay strong depends on regulators granting a fair return on investment. The alternative, by contrast, is the surest way to undermine both shareholder returns and long-term system reliability. The good news is cooperation is alive and well. That even includes states such as Connecticut and Massachusetts, where current attorneys general have taken to election-year bashing of local utilities.
In early 2003 more than two dozen electric companies were either in bankruptcy or on the brink of it. That’s when a new generation of management began systematically cutting debt and operating risk while mending relations with regulators. Nine years later the industry is in its best financial shape in decades, with low payout ratios, recession-resistant revenue and minimal near-term refinancing needs. And that’s despite a lingering recession in many parts of the country, environmental challenges and volatile credit markets. Now, finally, credit raters are starting to recognize the improvement, lifting both ratings and outlooks. That’s allowed companies to further improve balance sheets by issuing very long-term debt at extremely low interest rates.
Source: Guru Focus
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