Utilities Sector

• COG has reported largely stable FY 2024 results, with gross profit and EBITDA growing despite a lower top line.
• Consolidated leverage improved, supported by the stronger earnings and cash flows.
• Liquidity at the holdco level remains adequate.

• ENN Energy (2688 HK) has suspended trading. The possibilities include privatisation, third-party offer, increase in stake by ENN Natural Gas (600803 CH), and a change in control. 
• It trades on 1.16x 12-month forward P/B, vs. 5-year average of 2.42x and 1.31x since 2024. Given the lower forward ROE, it is difficult to return to the 5-year average.
• For PER, it should be higher than China Gas Holdings (384 HK) but lower than CR Gas (1193 HK). At 10.8x (average of the two), it equates to HK$74.26.  

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Greenko Energy
• In the US, the Conference Board Leading Index declined 0.3% (-0.2% e / -0.2% revised p) in February to 101.1. Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board, noted that “consumers’ expectations of future business conditions turned more pessimistic. Manufacturing new orders, which improved in January, retreated and were the second largest negative contributor to the Index’s monthly decline”.
• Separately, existing home sales unexpectedly rebounded 4.2% m-o-m (-3.2% e / -4.7% p) to 4.26 mn units in February. Sales climbed the most in the west and south regions, which were afflicted at the start of the year by wildfires in Los Angeles and severe winter storms, respectively.

• ENN Energy (2688 HK), a major clean energy distributor based in China, is currently suspended pursuant to the Takeovers Code
• The largest shareholder is ENN Group (34.28% of shares out), an entity controlled by founder Wang Yusuo and his wife, Zhao Baoju. 
• ENN Energy is a US$8.5bn market cap company. It’s possible ENN Group make an Offer. But more likely, I’d expect an Offer from a (larger) third party.

• ENN Energy (2688 HK) is in a trading halt “pending the issuance of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers containing inside information of the Company.” 
• ENN Natural Gas (600803 CH), also in a trading halt, is likely seeking to privatise ENN through a Cayman scheme. A high AGM minority participation necessitates an attractive offer.
• I use several methods to triangulate the likely offer price, which suggests a price range of HK$66.50-85.01, with an average of HK$76.04, a 28% premium to the last close.

• Maynilad Water Services (MYNLD PH) is looking to raise up to US$860m by selling shares at ₱20/share, valuing the company at US$2.82bn.
• The market cap and free float will depend on the number of shares sold in the IPO and whether the shares in the upsize option are primary or secondary shares.
• Global index inclusions should take place in November and December, while Philippines Stock Exchange PSEi Index (PCOMP INDEX) inclusion could take place in August 2026.

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• In this insight, we take a look at the rankings of potential ADDs and potential DELs for the June 2025 index rebal event.
• We see no index changes based on the latest available data. However, there will be some flows in June 2025 due to capping.

• Southern Company reported strong performance for the fourth quarter of 2024, with adjusted earnings per share (EPS) reaching $4.05, marking an 11% growth from the previous year and positioning itself at the top of the 2024 guidance range.
• This success is attributed to steady investments in state-regulated utilities and the successful management of weather-related impacts.
• Positives from the earnings report include the addition of 57,000 new residential electric customers and 26,000 new customers in natural gas distribution businesses, reflecting robust growth, particularly in the Southeast.

• WEC Energy Group reported its financial results for the year 2024, showing an adjusted earnings per share (EPS) of $4.88, a $0.25 increase from the previous year.
• Despite facing headwinds due to the warmest winter on record, which negatively impacted EPS by $0.25, the company managed to offset these challenges through various initiatives including efficient O&M management and strategic tax and financing activities.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• UGI Corporation reported its first-quarter fiscal 2025 results, demonstrating a notable 14% year-over-year increase in adjusted diluted earnings per share, reaching $1.37.
• This improvement is rooted in the company’s diversified business portfolio, effective tax management, and solid operational performance across its segments, particularly within its natural gas and global LPG operations.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Portland General Electric Company (PGE) has demonstrated solid financial performance and strategic progress throughout 2024.
• The company reported a year-over-year increase in GAAP net income from $228 million ($2.33 per share) in 2023 to $313 million ($3.01 per share) in 2024, and non-GAAP net income rose from $233 million ($2.38 per share) to $327 million ($3.14 per share).
• This reflects robust operational reliability, strong safety measures, and considerable investments in clean energy and infrastructure enhancements.

• Vistra Corp’s financial results for the fourth quarter of 2024 reflect a year of considerable transformation characterized by operational advancements and strategic acquisitions.
• The company successfully acquired three nuclear sites along with one million retail customers and expanded its workforce by nearly 2,000 employees.
• This addition was central to the company’s increased adjusted EBITDA of $5.656 billion, exceeding their original guidance ranges, due in part to an unexpected $545 million benefit from a nuclear production tax credit recognized in the fourth quarter.

• Pinnacle West Capital Corporation’s latest earnings indicated that the company demonstrated resilience and strategic progress in several areas, although some challenges remain.
• On the regulatory front, Pinnacle West achieved a constructive outcome in its most recent rate case, an essential factor for operational stability in the utility sector.
• The approval of a policy statement on formula rates by the Arizona Corporation Commission is a noteworthy development, aiming to reduce regulatory lag and support the company’s growth in Arizona.

• Xcel Energy reported a solid financial and operational performance for the 2024 fiscal year, despite facing significant challenges.
• The company posted ongoing earnings of $3.50 per share, marking the 20th consecutive year of meeting its guidance range.
• This reliability is attributed to Xcel Energy’s strategic investments across its eight-state service area, focusing on infrastructure and clean energy transitions.

• Public Service Enterprise Group (PSEG) presented its 2024 financial results, showcasing strong performance and strategic planning.
• The company reported robust earnings, with net income reaching $0.57 per share for the fourth quarter and $3.54 per share for the full year.
• Non-GAAP operating earnings were $0.84 per share for the quarter and $3.68 per share for the full year, aligning with the top of the 2024 guidance range and marking the 20th consecutive year that PSEG has met or exceeded its non-GAAP operating earnings guidance.

• Sempra Energy’s recent earnings highlighted a mixture of achievements and strategic shifts that shape its investment thesis.
• The company reported 2024 adjusted earnings per share (EPS) of $4.65, which is slightly below the prior guidance midpoint.
• Despite missing its EPS midpoint, Sempra continues to delineate expansive growth prospects with an adjusted 2025 EPS guidance between $4.30 and $4.70, and a 2026 forecast of $4.80 to $5.30, suggesting an approximate 12% increase from its updated 2025 midpoint.

• Southwest Gas Holdings, through its earnings for the fourth quarter and full-year 2024, has laid out its financial performance and forward-looking strategic priorities with a focus on solidifying its position as a leading regulated natural gas utility.
• The company has successfully executed several strategic initiatives over the past year, positively impacting its operational results and positioning it for future growth.
• A key positive noted in the call was the record annual operating margin achieved by Southwest Gas Holdings, marking its second consecutive year with a return on equity above 8%.

• Ameren Corporation reported strong operational and financial results for 2024, marked by strategic investments and regulatory successes.
• The company achieved adjusted earnings of $4.63 per share, surpassing the previous year’s $4.38 per share and exceeding the adjusted earnings guidance midpoint for 2024.
• This growth was largely driven by strategic infrastructure investments and weather-normalized retail sales growth of approximately 2% across Ameren Missouri.

• American Water’s recent conference call focused on several key aspects of their financial and operational performance during 2024, as well as future outlooks.
• Delivered earnings per share (EPS) for the year stood at $5.39, reflecting an 8% growth owing to favorable weather conditions and strategic investments.
• Notably, $3 billion was invested into capital initiatives, while regulatory efforts resulted in successful rate case agreements across multiple jurisdictions.

• CMS Energy Corporation recently released its financial results, providing insights into the company’s operational performance and future investment plans.
• The company reported adjusted net income for 2024 at $998 million, which equates to $3.34 per share, aligning towards the high end of their guidance range.
• This marks consistency in execution, backed by effective cost management and strategic investments in customer service and renewable energy.

• Black Hills Corporation’s Q4 and full-year 2024 earnings call outlined a range of strategic, operational, and financial updates, reflecting both positive outcomes and challenges.
• The company successfully advanced its customer-focused strategy, achieving key objectives, including meeting its earnings guidance and maintaining strong financial health.
• Despite facing mild weather and unplanned generation outages, Black Hills effectively managed expenses, aligning its financial performance with expectations.

• Brookfield Renewable Partners recently reported its fourth-quarter 2024 results, marking a year of significant operational and financial achievements.
• The company delivered its strongest financial performance to date, driven by a robust demand for its low-cost renewable energy.
• The company reported a 10% increase in funds from operations (FFO) per unit year-on-year, fueled by inflation-linked and contracted cash flows, strategic acquisitions, and organic growth initiatives.

• CenterPoint Energy reported its fourth quarter and full year 2024 earnings, showcasing both positive and challenging aspects.
• The company achieved a non-GAAP earnings per share (EPS) of $0.40 for the fourth quarter and $1.62 for the full year, reflecting an 8% increase over the previous year.
• This marks the fourth consecutive year of meeting or exceeding annual non-GAAP EPS guidance.

• Atmos Energy Corporation reported impressive fiscal 2025 first-quarter results with a net income of $352 million, translating into $2.23 per diluted share, a 7.2% increase compared to the previous year’s quarter.
• The company’s operating income rose by 15% to $459 million, buoyed by rate increases across its operating segments, which contributed $69 million, and customer growth.
• The organization added over 59,000 new customers over the past year, with substantial growth noted in Texas.

• Constellation Energy Corporation reported robust financial results for the third quarter of 2024, driven by its strong operational performance and strategic positioning within the energy sector.
• The company delivered GAAP earnings of $3.82 per share and adjusted operating earnings of $2.74 per share, surpassing expectations and prompting an upward revision of their full-year guidance to $8.00 to $8.40 per share.
• This adjustment reflects a midpoint increase of $0.60 from the upper end of their original forecast.

• Dominion Energy recently provided an update on its fourth quarter 2024 earnings, revealing a nuanced financial and operational picture.
• The company reported operating earnings of $2.77 per share for the year, situating within the higher end of its guidance, despite adverse weather conditions.
• GAAP earnings stood at $2.44 per share, contrasting with $0.58 for the fourth quarter operating earnings.

• The AES Corporation’s recent earnings addressed both achievements and challenges faced during 2024, alongside their strategic outlook for 2025 and beyond.
• The company reported a mixed performance for 2024, achieving an adjusted EBITDA of $2.64 billion, falling on the lower end of their guidance, primarily due to extreme weather events impacting their operations in Colombia and Brazil.
• Despite these setbacks, AES recorded a parent free cash flow of $1.1 billion, aligning with expectations, and a record adjusted EPS of $2.14, exceeding their guidance range.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Cikarang Listrindo
• Commerce Secretary Howard Lutnick said the Trump administration could announce some tariff relief for Mexican and Canadian goods as soon as today, after US President Donald Trump’s sweeping tariffs on Mexican and Canadian imports took effect yesterday.
• “Both the Mexicans and the Canadians were on the phone with me all day today trying to show that they’ll do better, and the president’s listening, because you know he’s very, very fair and very reasonable”, Mr Lutnicksaid in an interview with Fox Business yesterday.

Cikarang Listrindo (CL) is Indonesia’s oldest independent power producer, with 1,144 MW of capacity. The company has two natural gas-fired plants with a combined installed capacity of 864 MW, and a 280 MW coal-fired plant. It is the sole electricity provider to c. 2,700 tenants across five industrial estates in Cikarang. It was listed on the Indonesia Stock Exchange in June 2016. The Joso, Brasali and Sofyan families own over 80% of the company.