The Energy Policy Act of 2005 (EPAct) came into effect February 8, 2006 and repealed the Public Utility Holding Company Act of 1935. With the new regulations, some of the obstacles to utility consolidation have been removed. With the mounting pressure from investors to deliver greater earnings growth, and the international expansion strategies in ruins, there aren't many available options for increased profitability.
The internal measures taken by many of the public utilities to cut costs, along with the anticipated domestic population/economic growth predictions haven't been enough to deliver the annual earning's expected by shareholders. The international growth possibilities for electric and gas companies continues to be an area shrouded in controversy; the uncertainty of the global environment versus the potential for exponential growth. The opportunities in China alone are phenomenal, but often the risk will outweigh the allure.
The most viable opportunity for increased profitability: merger and acquisition strategies. Although the mergers of the recent past would seem to indicate interest might be subsiding, the contrary is true. It would appear that much of the industry is considering the opportunity that exists for buyers and sellers in a consolidating industry.
The Ernst & Young LLP's Electric & Gas Energy practice provides services to over 160 clients in North America. Of those clients, a large percentage is the top utilities sector companies. The findings of Ernst & Young further support the fact that the utilities industry seems to be preparing for another round of consolidation.
The mergers of 2005 between FPL and Constellation Energy Group, MidAmerican Energy's proposed purchase of PacifiCorp, and Duke Energy's bid for Cinergy would seem to be only the beginning, not the finale.
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Source: http://www.articlealley.com/article_91509_15.html
Source: http://www.articlealley.com/article_91509_15.html