Several countries in Western Europe experienced blackouts on November 4. The blackouts originated from a routine shutdown by E.On of a high voltage line in north-west Germany. This was the most serious blackout to hit Europe in several decades and was the result of a domino effect through Europe's interconnected grid systems. Please refer to the attached PDF document to view the full November report for the EIC Energy Utility Fund.
According to a report from Capgemini, European reserve margins were 1% lower in 2005 than in 2004, reflecting the difficulty to build new generation capacities. Likewise, The North American Electric Reliability Council issued a report concluding that the adequacy of electric supply and transmission reliability in North American will decline over the next 10 years unless significant investments are undertaken. Please refert to the attached PDF document to view the full October report for the EIC Energy Utility Fund.
M&A activity again took center stage in Europe as Spanish construction companies Acciona and ACS continued their forays into the utility sector. First, Acciona acquired a 10% stake in Endesa, which prompted German E.On to increase its cash bid for the company by almost 40%. Shortly thereafter, ACS acquired a 10% stake in Iberdrola, fuelling speculation that a merger of Iberdrola and Union Fenosa was in the cards (ACS also owns 35% in Union Fenosa). Please refer to the attached PDF document to view the full September 2006 report for the EIC Energy Utility Fund.
In August, EDF launched a takeover of the minorities in its Hungarian subsidiary Demasz for EUR 109 million. In Italy, Hera announced the acquisition of a 46.5% stake of SAT, a multi-utility in the Modena region. Discussions between the majority owners of AEM and ASM are intensifying as the municipalities try to create a “super-utility” in Northern Italy. Please refer to the PDF document below to view the full monthly report of the EIC Energy Utility Fund.
During July, heat waves in Europe and the U.S. resulted in new power demand records in many regions. German spot baseload traded as high as 300 EUR/MWh and the Swiss Electricity Price Index hit 340 EUR/MWh. Given the good hydro storage levels in the Alps, this bodes well for utilities with large hydro generation capacities. Please refer to the PDF document below to view the full monthly report for the EIC Energy Utiltiy Fund.
Corporate activity remained high among European Utilities. International Power acquired a Texas coal-fired plant for USD 1.1 billion, getting itself positioned to benefit from an increasingly tight Texas power market. Moreover, E.ON is nearing an agreement with Gazprom, which would give the company a stake in a Siberian gas field in return for providing Gazprom with access to part of its distribution clients. Please refer to the PDF document link below in order to view the full April report for the EIC Energy Utility Fund.
On February 22, E.On made a surprising EUR 29 billion bid for Endesa, entering into competition with GasNatural’s existing EUR 22 billion bid. E.On’s bid for Endesa triggered further M&A activity in the sector. Suez and GdF announced their plans to merge in a move to fend-off Enel, which had declared its interest in Electrabel (subsidiary of Suez). Please refer to the PDF document below to view the full February 2006 report for the EIC Energy Utility Fund.
U.S. power sector is the continued progress towards deregulation. In January 25th, the Illinois Commerce Commission (ICC) unanimously approved the transition to market-based rates from 2007. While the decision still faces legal challenges, it is likely that Illinois utilities Exelon and Ameren will be able to sell power at significantly higher market prices going forward. Other states, including Ohio and Pennsylvania, are also taking steps to further open power markets to competition. Please refer to the PDF document below to review the full January 2006 report for the EIC Energy Utility Fund.
In December, FPL acquired Constellation Energy for US$ 11 billion. Clearly FPL , the main regulated utility in Florida, used the acquisition to significantly increase its exposure to the favorable fundamentals of the U.S. Northeast power market. Despite the latest consolidation activity (Exelon/PSEG, Duke/Cinergy) the U.S. power industry still remains fragmented. Please refer to the PDF document attached to view the full December report for the EIC Energy Utility Fund.