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Increasingly Debt-Laden, Regulated Utility Sector Outlook Veers from ‘Stable’ to ‘Negative’

June 21, 2018

For the first time since it began conducting sector outlooks, Moody’s Investors Service has downgraded the regulated utility sector from stable to negative. The new outlook reflects a surge in financial risks in the sector as more individual companies in the regulated space funnel funds to debt.

Using an analysis of 42 of the largest U.S. utility and power holding companies and 102 utility operating companies with at least 10 years of financial data, Moody’s concluded in a June 18 report that the outlook clearly points to a “declining financial trend” in the sector. The trend is a function of “higher holding company debt levels incurred in the last few years” as a result of lower cash flows, and “a lower deferred tax contribution to cash flow going forward due to tax reform.”

The credit rating agency’s downgrade is mostly rooted in “degradation” of key financial credit ratios. These include the ratio of cash flow from operations to debt; funds from operations (FFO) to debt and retained cash flow to debt; as well as certain book leverage ratios.…

From the Pages of POWER Magazine: #TBT #ThrowbackThursdays

February 9, 2018

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In early 1882, U.S. industry was still heavily dependent on the water wheel, and many housewives cooked on wood-burning stoves. Power was made where it was used because there was no effective means of transmitting energy long distances. But 1882 was a year of dramatic changes. The world was just beginning to grasp the implications of a new, incredibly versatile form of energy—electricity.

POWER magazine was launched that year, not too long after introduction of the first practical steam engine by James Watt in England. The steam engine enabled development of industries based on mechanical—rather than human or animal—energy. Soon, just about every manufacturing plant had its own steam-engine power plant. During this paradigm-shifting period, POWER participated in the development of the engines that powered the Industrial Revolution.

From the beginning, POWER had to keep editorial pace with a fast-developing technology and a market strongly influenced by the fantastic economic growth of the post–Civil War period. New products and scientific advances proliferated, and the magazine’s pages reflected the changing world around it.…

SCANA Hit with New Subpoena From SEC

October 19, 2017

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SCANA Corp., already under federal and state scrutiny for how it handled the now-abandoned V.C. Summer nuclear expansion, has been served with a document subpoena by the U.S. Securities and Exchange Commission (SEC).

SCANA said in a news release that it intends to fully cooperate with the investigation of the nuclear project. The development follows a drastic drop in the company’s share price in late September.

SCANA and project partner Santee Cooper in mid-September received federal subpoenas for documents associated with a much-guarded February 2016 assessment report conducted by Bechtel, documentation of meetings with the construction and civil engineering firm, and documentation of site walkdowns and real-time observations at the half-built project.

South Carolina lawmakers on September 26 urged state law enforcement to conduct a criminal investigation into how the project was handled. The measure came after several legislative committee hearings, many focused on the Bechtel audit. At one point, state lawmakers threatened to subpoena if the utilities didn’t release it.…

Court Dismisses Westinghouse Claim for $2B Recovery from CB&I

July 1, 2017

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More grim news emerged for financially strapped Westinghouse after the Delaware Supreme Court reversed a chancery court decision that the company was counting on to recoup $ 2 billion from an acquisition dispute with Chicago Bridge & Iron (CB&I).

The court rejected Westinghouse’s contention of CB&I’s calculations of its final purchase price—even though it paid nothing for the company up front. In favor of CB&I’s pleading, the court also ruled that nearly all of Westinghouse’s claims would not be presented to an independent auditor.

A Contentious Relationship

Westinghouse took the desperate step of filing for bankruptcy protection in March 29, crippled by financial setbacks stemming from half-built AP1000 reactor projects in Georgia and South Carolina. In documents associated with the filing, Westinghouse pointed to compounding delays associated with federally mandated design changes to the Vogtle and V.C. Summer projects, as well construction challenges, all of which played into the exorbitant cost increases that ultimately caused its financial debacle (for more, see How Westinghouse, Symbol of U.S.…

U.S. Nuclear: From Hope to Despair

March 30, 2017

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A decade ago, the annual Platts nuclear energy conference in Washington was brimming with optimism over a coming “nuclear renaissance,” as licensing requests poured into the Nuclear Regulatory Commission and companies announced ambitious plans for new nuclear construction. Ten years later, the not-so-under-the-surface theme of the conference was nuclear survival.

“The question is survival,” former Entergy nuclear executive Bill Mohl told attendees at the annual Platts nuclear energy conference in Washington, D.C., in early February. Mohl, who led Entergy’s merchant power business and retired February 28, went on to explain that Entergy’s long-term strategy of buying up single-unit nuclear plants at bargain-basement prices and bidding them into the regional transmission operator (RTO) and independent system operator (ISO) competitive wholesale markets was a miserable failure.

It seemed like a really good idea at the outset, but a combination of factors undercut the strategy, and Entergy is now exiting merchant nuclear power in as big a way as it entered. Vermont Yankee is shuttered.…

Learning from the Clean Air Act’s Tragic Flaw

June 5, 2016

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“Why are you picking on the Clean Air Act?” That’s a question we’ve heard more than once while traveling the country to talk about our new book, Struggling for Air: Power Plants and the “War on Coal.”

The book focuses on what we see as the “tragic flaw” of the Clean Air Act of 1970 (CAA): its exemption of existing industrial facilities—most notably, coal-fired power plants—from the Environmental Protection Agency’s (EPA’s) nationwide performance standards for soot- and smog-forming pollutants. Starting in 1971, new plants had to reduce their sulfur dioxide emissions by either installing multimillion-dollar pollution “scrubbers” or burning pricey low-sulfur coal. In 1978, scrubbers became mandatory regardless of the type of fuel burned, as did additional technology for controlling nitrogen oxides emissions. But existing plants could continue polluting in unlimited amounts. This “grandfathering” gave utilities a perverse incentive to keep old, dirty facilities running decades longer than they otherwise would have, stymieing state efforts to meet the CAA’s air quality goals.…