Just One Man's Opinion - 05 August 2005
by JMac
UTILITIES
Four score and a few years ago a Chicago financier by the name of Samuel Insull created a monopoly of midwest utilities through the use of holding companies. He formed these companies, all controlled by him or his people, and they would in turn buy the stock in the numerous small and medium local utility companies. Soon, through a myriad of holding companies, he controlled the electric industry fron Chicago to Mexico. Finally, his scheme collapsed, he went bankrupt and Congress passed the Public Utilities Holding Act of 1935. It prevented any company from holding a controlling share of anymore than one interstate utility company.
President Bush is about to sign into law the new energy bill that, among other things, repeals that prohibition. This will mean that banks, insurance companies and large investment houses like Goldman Sachs, Kolbert, Kravis & Roberts and Warren Buffet can legally do what Insull attempted. In addition, price controls on wholesale and some retail electricity are coming off.
In the past, utility investment was strictly for steady income. That will not be the case anymore. Utilities will be growth and merger and acquisition plays. You should look for the likely winners and takeover candidates (like Public Service of New Mexico and Hawaiian Electric). Best of Breed - Duke, El Paso, FP & L , Encana Dynegy and Excelon. Watch for any dramatic share volume in Calpine, Baltimore Gas & Light and other small or medium electric or gas utilities.
Hey! Maybe Uncle Sam will privatize the TVA!
UTILITIES
Four score and a few years ago a Chicago financier by the name of Samuel Insull created a monopoly of midwest utilities through the use of holding companies. He formed these companies, all controlled by him or his people, and they would in turn buy the stock in the numerous small and medium local utility companies. Soon, through a myriad of holding companies, he controlled the electric industry fron Chicago to Mexico. Finally, his scheme collapsed, he went bankrupt and Congress passed the Public Utilities Holding Act of 1935. It prevented any company from holding a controlling share of anymore than one interstate utility company.
President Bush is about to sign into law the new energy bill that, among other things, repeals that prohibition. This will mean that banks, insurance companies and large investment houses like Goldman Sachs, Kolbert, Kravis & Roberts and Warren Buffet can legally do what Insull attempted. In addition, price controls on wholesale and some retail electricity are coming off.
In the past, utility investment was strictly for steady income. That will not be the case anymore. Utilities will be growth and merger and acquisition plays. You should look for the likely winners and takeover candidates (like Public Service of New Mexico and Hawaiian Electric). Best of Breed - Duke, El Paso, FP & L , Encana Dynegy and Excelon. Watch for any dramatic share volume in Calpine, Baltimore Gas & Light and other small or medium electric or gas utilities.
Hey! Maybe Uncle Sam will privatize the TVA!
posted by TandaPundit at 8.8.05
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