Mr. De Croisset: I focus on regulated electric utilities in the US.
TWST: As we look at that space, what's of prime import at this point? What's
going on that investors are really focused on?
Mr. De Croisset: Back in November and December of last year investors were
focused heavily on regulated electric utilities. This was the flight to safety
group and it outperformed the S&P by roughly 20%. Year to date, the regulated
group has been lagging behind higher beta names as investors chase performance.
This has weighed on our space. In addition, several concerns have surfaced.
Regulated utilities have been impacted by the slowing economy (GDP and
electricity usage are highly correlated), by regulatory pushback and by the
deferral of capital plans. All this tends to slow earnings growth. On the
valuation front, multiples for regulated names have also been depressed in our
opinion by high credit spreads and high Baa bond yields.
Tickers included in this excerpt: FE, PCG, PGN, POR, TE
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