TOP 82 IOUs FINANCIAL RANKINGS:Mergers pare down players; revenues climb while dividend growth rates languish

Pam Boschee, Managing Editor

Mergers continue to shorten the list of utility holding companies while total revenues keep climbing. This year’s rankings, shown in Table 1, included 82 companies (down from last year’s 91). Enron Corp. holds on to the number one position with total revenues of $40 billion, a 29 percent increase over last year.

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As shown in Table 1, 62 holding companies have total revenues exceeding $1 billion a year. Average total revenue for the top 10 companies increased from $14.6 billion in 1998 to $18 billion in 1999. This year’s total revenues ranged from Enron’s high of $40 billion to BayCorp Holdings’ low of $46 million. In contrast, last year showed a range from Enron’s $31 billion to Maine Public Service Co.’s $57 million.

The top five companies showed the following percentage increases in total revenues compared to last year: Enron, 29 percent; Duke Energy Corp., 23 percent; PG&E Corp., 4.5 percent; UtiliCorp United, 48 percent; and TXU Corp., 16 percent.

The top 20 slots in Table 1 remained occupied by most of the same players as last year, with minor leap-frogging. A newcomer was Dynegy in the number six slot. Dynegy’s acquisition of Illinova boosted the latter’s ranking from number 41 last year.

Another notable climb in ranking was seen in Avista Corp.’s number 11 position this year, up from number 28 last year. Its total revenues more than doubled from $$3.7 billion to $7.9 billion. (Avista’s ranking next year could drop significantly, given the loss in earnings disaster it experienced with this summer’s roller coaster wholesale prices in the Northwest.)

Other big gainers in total revenue ranking from 1998 to 1999 included:

  • NorthWestern Corp. from 59th to 34th;
  • LG&E Energy Corp. from 49th to 38th;
  • Sierra Pacific Resources from 72nd to 55th; and
  • Cleco Corp. from 81st to 67th.

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Table 2 lists the top 30 in return on common equity. Leading the pack is Pinnacle West Capital Corp., whose major subsidiary is Arizona Public Service Co. (APS). APS operates and is a co-owner of the Palo Verde Nuclear Generating Station. Its ROE of 76 percent is more than double that of number two PECO Energy Co. with 30.5 percent.

Of the top 10 companies ranked for ROE last year, five remained in the top 10 this year (PECO Energy Co., PPL Corp., IPALCO Enterprises, Black Hills Corp. and Otter Tail Power Co.). Two others from last year, OGE Energy Corp. and Florida Progress Corp., were included in the top 30 this year.

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Table 4 shows the top 30 companies in electric revenues. Southern Company was the leader in electric revenues at $9.6 billion, which accounts for 83 percent of its total revenues. Unicom Corp, in position 5, derives 99 percent of its total revenues from electric revenue. In contrast, only 2.5 percent of Enron’s total revenues are attributable to electric revenues.

The trend toward non-regulated sources of revenue is growing among investor-owned utilities (IOUs). Non-regulated businesses include telecommunications, cable tv, oil and gas exploration, HVAC services, software companies, Internet startups and others.

According to The C Three Group, non-traditional businesses of U.S. IOUs in 1998 accounted for more than $131 billion in revenues and $194 billion in assets. Substantial growth was seen in 1999-to $178 billion and $272 billion respectively.

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Table 3 shows merger activity announced since June 1995. According to the Energy Information Administration, over the past three years, IOUs have completed 22 mergers. By the end of 2000, another 25 pending mergers will likely be completed.

One consequence of this trend is the increasing concentration of power plant ownership. By the end of 2000, the 10 largest IOUs will own about 51 percent of all IOU-owned power production capacity (up from 36 percent in 1992) and the 20 largest IOUs will own about 73 percent (up from 56 percent in 1992).

Another consequence of merger and acquisition activity is the changing of holding company names. Company names included in last year’s ranking, but not listed this year due to renaming or assimilation into new holding comp-anies were:

  • PacifiCorp, acquired by ScottishPower;
  • Central and South West Corp, acquired by American Electric Power Co.;
  • GPU Inc., acquisition pending by FirstEnergy Corp.;
  • Baltimore Gas & Electric Co., now named Constellation Energy Group;
  • MarketSpan Corp., now named Keyspan Energy;
  • MidAmerican Energy Holdings, acquisition pending by Berkshire Hathaway, Walter Scott, and David Sokol;
  • Illinova Corp., acquired by Dynegy;
  • New England Electric System, acquired by National Grid;
  • Interstate Energy, now subsidiary of Alliant Energy Corp.;
  • BEC Energy and Commonwealth Energy System, merged in 1999, now called NSTAR;
  • Rochester Gas and Electric Corp., now named RGS Energy Group;
  • Nevada Power Co., acquired by Sierra Pacific Resources;
  • Orange and Rockland Utilities, acquisition pending by Consolidated Edison Company of New York;
  • CILCORP, acquired by AES Corp.;
  • Eastern Utilities Associates, acquired by New England Electric System; and
  • Central Hudson Gas & Electric Corp., now named CH Energy Group.

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Table 5 shows dividend growth rates over the last year and over the last five years. Note that the dividend data does not factor in stock splits.

The top five in the 1-year growth rate category were: SEMCO Energy Inc., 16.22 percent; Columbia Energy Group, 14.29 percent; CMS Energy Corp., 10.32 percent; Maine Public Service Co., 10 percent; and Pinnacle West Capital Corp., 8.13 percent. The bottom five in the 1-year growth rate category are: Avista Corp., -54.29 percent; Montana Power, -50 percent; Otter Tail Power Co., -48.44 percent; Enron Corp., -47.92 percent; and Minnesota Power Co., -47.55 percent.

The top five in the five-year growth rate category were: CMS Energy Corp., 11.48 percent; Pinnacle West Capital Corp., 9.36 percent; TNP Enterprises, 9.06 percent; Fluor Corp., 7.46 percent; and NiSource, 6.78 percent. The bottom five are: Green Mountain Power Corp., -28.63 percent; Avista Corp., -21.12 percent; IPALCO Enterprises, -19.66 percent; Montana Power Co. and OGE Energy Corp., tied for number four with -15.91 percent; and Minnesota Power Co., -14.90 percent.

Overall, 57 of the listed 113 companies demonstrated 1-year dividend growth rates of zero or less, while 44 of the 113 demonstrated 5-year dividend growth rates of zero or less.

Financial Times Energy (FTE), a provider of global energy industry information, provided the data for this report. Data was compiled from Securities Exchange Commission and Federal Energy Regulatory Commission sources.

FTE’s publications, database information systems, conferences, consulting groups, research staff and resources are designed to help senior managers in all energy-related fields make informed decisions and keep pace with industry trends. Their management reports, covering topics from risk management to electric transmission to natural gas in Asia, offer executives the insight they need to make intelligent business decisions. FT Energy focuses on the retail side of the energy business through E Source offerings, and on the supply-side with such in-depth databases and analytical tools as POWERdat, GASdat, and POWERmap, as well as RDI multi-client studies.

Offices of FTE are located in the U.S.: Boulder, Colo.; Arlington, Va.; Houston, Texas; Knoxville, Tenn.; and in the U.K.: London.

The company is a wholly owned subsidiary of the London-based international media group Pearson plc.

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