For the past 15 years or so, the American community of investor-owned utilities has seen more than its share of mergers and acquisition activities. While some of the attempts at merger or acquisition has been brought to a successful conclusion and increased operating efficiencies and rising profitability, others have resulted in less satisfactory outcomes, including several instances where the partners have been left at the altar. In these instances, the public utilities commissions in one of the states involving one or the other of the candidate parties, have most often viewed their state's ratepayers as the jilted party.

For financial executives within the industry, as well as for financial advisors, and the investment community addressing the energy industry, a review of developments post-merger is in order.

Among the highlights in the 11-page white paper report are these:

. There was little noticeable improvement in the financial performance of merged companies as of the end of the first quarter of 2007.

. Financial measures including price-earnings ratio and return-on-equity were better for the industry as a whole, than it was for the selected merged companies.

. A total of 7 financial measures were used in the comparative performance review.

. A summary compilation of chronological events related to the merger and acquisition activities among 19 major electric utility holding companies is presented in the report.

. A review of state-level disapprovals of proposed mergers found that the key reasons for turning down the merger proposal centered on lack of perceived benefits to rate payers within the state(s) affected.

Perhaps the biggest surprise for readers based on our assessment is that in spite of seemingly greater operating efficiencies, there seems to be little difference in the financial health of the merged entity even after some years following the merger, at least as of the publication date of May, 2007.



Publication Date: May, 2007
Publisher: Newton-Evans