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TWST: Mark, how have the utilities done this year from an operating point of
view relative to expectations?
Mr. Sadeghian: Regulated electric utilities have done reasonably well, given the
mild winter weather we saw across much of the US in the first half of the year.
And Q3 & the moneymaking quarter for most summer peaking utilities & seems to be
strong, given the heat wave that lingered in July and August. The other group of
names in our list & electric utilities with exposure to merchant power prices,
specifically baseload coal and nuclear capacity & have done very well, given
high power prices and fat spark spreads. TWST: Daniele, from your perspective, how did the first half treat the utility
industry?
Ms. Seitz: In the first quarter, the market was generally concerned about the
potential impact of mild weather on electric earnings, and the group
underperformed in the first quarter relative to the market. As it seemed that
earnings were surprisingly better than expected, electric stocks rebounded
rapidly in the second quarter. Demand growth in the first six months averaged
3%. Similarly, expectations of a difficult comparison regarding third quarter
results this year (due to an exceptional summer in 2005) seemed to turn
positive, as many companies went through a prolonged heat wave in July. Also,
demand growth in the industrial sector was robust relative to last year.
Tickers included in this excerpt:
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