Utilities Sector

• Despite China Gas Holdings (384 HK)‘s marginal 3.8% drop in 1H FY25 net profit, it has rebounded from a 25.8% collapse in FY24. It maintained an interim DPS of HK$0.15.
• Dollar margin expanded Rmb0.02/cu.m. and gross margin was up 0.8pp. Profit from value-added services grew 15.4%, though overall earnings are dragged by LPG and JVs.
• FY25 is a year of profit recovery. Its improving cash flow, reduction in capex, and stronger balance sheet should support a stable dividend, putting it on a 7.8% yield.  

• Public Service Enterprise Group (PSEG) reported its third quarter 2024 financial results, highlighting key developments and regulatory activities.
• The company posted net income of $1.04 per share for Q3 2024, compared to $0.27 per share in Q3 2023.
• For the first nine months of 2024, net income reached $2.97 per share versus $4.03 per share for the same period in 2023.

• The recent earnings of Sempra highlights both the strengths and challenges the company is navigating.
• Sempra has reported third-quarter 2024 adjusted earnings per share (EPS) of $0.89, compared to $1.08 in the same quarter last year, showcasing a decline which might raise some concerns among investors.
• This annual decrease was noted despite an increase in revenues due to higher operating costs and interest expenses, alongside regulatory and tax-related headwinds.

• ONE Gas has reported its financial performance for the third quarter of 2024, achieving results that align with the company’s expectations.
• This performance is largely due to consistent operational execution and favorable regulatory outcomes.
• ONE Gas has cautiously updated its earnings guidance, now anticipating earnings per share (EPS) to range between $3.85 to $3.95, slightly higher than previous forecasts.

• OGE Energy Corp reported its third-quarter 2024 financial results, revealing consolidated earnings of $1.09 per share, fueled by robust energy demand across all sectors and a significant rise in customer growth, which surpassed historical averages.
• The electric company recorded earnings of $1.12 per share, while the holding company posted a loss of $0.03.
• The company’s operational excellence and enhanced digital services to customers played a crucial role in these outcomes.

• Pinnacle West Capital Corporation’s earnings for the third quarter of 2024 highlighted both operational achievements and challenging financial elements that could shape investment considerations.
• The company reported earnings of $3.37 per share, slightly down from the previous year’s comparable quarter.
• This decline was attributed to higher operational, maintenance, and depreciation expenses, as well as increased financing costs and timing in income taxes.

• Portland General Electric Company (PGE) delivered strong third-quarter 2024 financial performance, reflecting its operational efficiency and strategic initiatives.
• The company reported a GAAP net income of $94 million, or $0.90 per diluted share, doubling from $47 million, or $0.46 per share, in the same period last year.
• This significant improvement was primarily driven by lower power costs, increased demand from industrial customers, and the strategic acquisition of renewable resources.

• Entergy Corporation’s recent earnings report highlighted both positive strides and certain challenges faced by the company in the third quarter of 2024.
• The company announced an earnings per share (EPS) of $2.99, and raised their guidance range by $0.10, reflecting a strengthened financial performance despite being slightly lower than last year’s results due to last year’s exceptionally high weather-related earnings.
• They also increased their long term outlook due to a greater capital investment plan driven by growing industrial sales and a surge in clean energy product interest.

• NRG Energy’s third quarter 2024 results reflect a robust financial and operational performance, marked by increased guidance for the year and a solid forecast for 2025.
• The company reported a strong EBITDA, underpinned by heightened plant operations and effective management, further amplified by strategic moves in the consumer automation and energy management sectors.
• 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.

• Ormat Technologies has reported its financial performance for the third quarter of 2024, showcasing both strengths and challenges.
• The company’s adjusted EBITDA saw an increase of 16.3%, reaching $137.7 million, attributed to a growing operating portfolio and stable operational performance.
• The Electricity segment played a significant role, bolstered by the acquisition of assets from Enel and improved operations at the Puna facility.

• Southern Company recently reported its third-quarter 2024 financial results, showcasing a blend of operational resilience and moderate financial performance amidst significant external challenges, most notably Hurricane Helene.
• The storm was described as the most destructive in Georgia Power’s history, impacting 53 counties and causing over 1.5 million power outages.
• Despite the destruction, Southern Company demonstrated impressive operational capabilities with a rapid restoration effort.

• Brookfield Renewable Partners LP (Brookfield Renewables) delivered a robust performance in the third quarter of 2024, achieving record results in terms of funds from operations (FFO) and asset recycling, while also positioning itself strategically for future growth.
• The company’s execution of its business strategies and asset monetization initiatives have been central to its recent performance.
• 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.

• American Electric Power (AEP) reported its financial performance for the third quarter of 2024, revealing a solid standing in key areas while also addressing certain strategic and operational challenges.
• The company reported third-quarter operating earnings of $1.85 per share, totaling $985 million, up from $1.77 per share or $924 million in the same quarter of the previous year.
• This result demonstrates AEP’s ability to generate stable earnings, supported primarily by its regulated utilities business.

• Atmos Energy Corporation’s fiscal 2024 fourth-quarter results highlight a consistent growth trajectory marked by robust capital investments, enhanced operational strategies, and expanding customer base.
• The company reported earnings per share (EPS) of $6.83, marking its 22nd consecutive year of EPS growth, alongside its 40th consecutive year of dividend growth.
• The fiscal year achievements reflect Atmos Energy’s successful execution of its strategy to operate safely and reliably while modernizing its natural gas distribution, transmission, and storage systems.

• Constellation Energy Corporation’s recent earnings for the third quarter of 2024 highlighted both the strengths and challenges faced by the company in the current market landscape.
• The presentation provided a detailed overview of the company’s operational performance, regulatory updates, and strategic initiatives, offering a comprehensive picture of its current trajectory.
• 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.

• AES Corporation has demonstrated a mixture of positive advancements and notable challenges in its third quarter earnings results for 2024.
• The company’s performance aligns well with its strategic goals, especially in renewable energy expansion and U.S. utility growth, although some headwinds from severe weather conditions in South America have depressed certain results.
• 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.

• CenterPoint Energy’s third quarter 2024 earnings call highlights both achievements and challenges in the utility company’s recent performance.
• Situated in the heart of an active hurricane season, the call commenced with the company extending concerns and support for those affected by Hurricanes Helene and Milton.
• This also underscored CenterPoint’s resilience and industry solidarity, demonstrated by their significant participation in mutual aid efforts despite disruptions caused by these natural disasters.

• CMS Energy Corporation recently reported its third-quarter results for 2024, highlighting a blend of opportunities and challenges.
• The company reaffirmed its financial guidance, projecting an adjusted earnings per share (EPS) range of $3.29 to $3.35 for the year, with expectations leaning towards the high end.
• Key drivers of this performance include favorable weather conditions, constructive rate outcomes, and operational efficiencies in storm response, which have collectively offset increased insurance and IT costs.

• Dominion Energy’s latest quarterly earnings outline a blend of strategic positioning and operational challenges for the company.
• The company reports operating earnings of $0.98 per share for the third quarter, alongside GAAP earnings of $1.12 per share.
• With nine months of results in, full-year earnings guidance has been slightly narrowed to a range of $2.68 to $2.83 per share, maintaining a midpoint of $2.75.

• DTE Energy’s third-quarter 2024 earnings presentation revealed a mixed outlook characterized by robust financial performance amidst ongoing operational and regulatory challenges.
• The company reported operating earnings of $460 million, translating to $2.22 per share, highlighting a substantial improvement from the previous year due to increased electric margins, reduced storm costs, and favorable weather impacts.
• However, these positive results were partially offset by higher operational costs in the gas segment and a slowdown in DTE Vantage earnings due to timing and one-time impacts from 2023.

• Duke Energy’s third-quarter 2024 earnings highlighted the operational and financial impacts of an unprecedented hurricane season, significantly influencing the period’s results.
• The company reported an adjusted earnings per share of $1.62, down from $1.94 in the same quarter of the previous year.
• Several factors contributed to this decrease, primarily related to the restoration costs and revenue losses due to the series of hurricanes—Debby, Helene, and Milton—that caused extensive damage across Duke Energy’s service territories.

• Shandong Hi-Speed New Energy G (1250 HK) disclosed a possible mandatory unconditional offer from Shandong Hi-Speed Holdings Gro (412 HK) at HK$1.78, a 7.2% premium to the undisturbed price.
• The offer is conditional on SDHS completing a sale and purchase agreement (SPA) to acquire CITIC Securities’ entire 13.52% stake at HK$1.78 per share.
• The key precondition of the SPA is SDHS shareholder approval of an ordinary resolution relating to the SPA and the possible offer. The vote is a formality. 

• Not a delisting Offer, but a possible mandatory unconditional Offer from Shandong Hi-Speed Holdings (412 HK) (SDHG) at HK$1.78/share, a premium of 7.23% to last close. 
• SDHG, with 43.45%, has entered into an SPA with two Citic Securities (H) (6030 HK)-backed funds holding 13.52%, the completion of which lifts SDHG’s take to 56.97%, triggering an MGO. 
• Conditions to the SPA are straightforward. Expect Shandong Hi-Speed New Energy G (1250 HK) to trade tight, if not through terms. 

• NTPC Green Energy Ltd (2214556D IN) raised around US$1.2bn in its upcoming India IPO.
• NTPC Green Energy Limited (NGEL) is a renewable energy public sector enterprise and a wholly owned subsidiary of NTPC Limited, a Maharatna central public sector enterprise (PSU).
• We have looked at the company’s past performance and valuations in our earlier notes. In this note, we talk about the trading dynamics.

• Southwest Energy Corporation is focusing on natural gas distribution utilities, having sold its pipeline and storage business
• The company holds a majority stake in Centuri Holdings, an infrastructure construction services provider
• Southwest Energy is expected to pay off debt, initiate buybacks or increase dividends, and has rate case filings in multiple states that could lead to substantial rate base growth

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
• The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering. 
• That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered. 

• Since the US$3.5 billion primary/secondary offering announcement, Kansai Electric Power (9503 JP)’s shares have been down 20.6% from the undisturbed price of JPY2,397 per share (13 November).
• Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, KEPCO’s shares have followed the pattern of previous large placements.
• The offering will likely be priced on 26 November. The average large Japanese placement tends to generate positive returns.

• GQG acknowledges the seriousness of the charges, but maintains its confidence in the Adani Group companies.
• GQG sees a distinction between the allegations against the individuals and the operational strength of the businesses.
• The firm believes that the fundamentals of the companies remain strong. GQG will continue to monitor the situation closely.

• CRRC Corp Ltd H (1766 HK) recent innovation on carbon-fibre subway trains for commercial operation has displayed their capability to decarbonize transport.
• Free cash flow improved from RMB -11 billion last year to now -1.4 billion and 28% of its market caps are in cash. 
• CRRC used to trade at as high as 40x PER and 67x price to cash flow and currently is trading at 10x PER and 4x price to cash flow. 

• In the US, existing home sales rose 3.4% m-o-m in October (2.9% e / -1.3% revised p) to an annualised 3.96 mn units.
• That said, existing home sales grew at the slowest pace since late 2010, amid rising mortgage costs.
• Separately, the Conference Board leading index fell 0.4% (-0.3% e / -0.3% revised p) to 99.5 in October 2024. 

• Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
• In our earlier note, we talked about the placement and ran the deal through our ECM framework.
• In this note, we talk about the updates and share price performance since then.

• The US indictment of key executives is a material credit negative for the Adani Group, with the allegations being more serious than those from Hindenburg Research’s short-sell report in January 2023.
• In the near term, the US indictment is likely to constrain the group’s access to financing, particularly in the offshore market.
• We note that the Justice Department’s charges are directed at the individual executives, not at Adani Green Energy or other group entities.

• Adani Green Energy Limited (AGEL) is one of the world’s largest developers and operators of solar and wind power.
• The company’s assets are geographically diversified across India, with total locked-in capacity of 20.4 GW (of which 10.9 GW was operational as of June 2024).
• AGEL is listed on the Bombay Stock Exchange and National Stock Exchange of India. 

• Following 3Q24 results, we update our outlook for Spruce, a leading owner-operator of residential solar power purchase agreements (PPAs) and solar lease agreements (SLAs).
• Spruce grows through the acquisition of mature portfolios.
• Its portfolio has expanded at a 29% CAGR since 2018 and Spruce now owns the cash flow from approximately 75,000 home solar assets and contracts.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Adani Green Energy, Yankuang Energy
• In the US, treasuries edged higher yesterday, with yields declining 2-4 bps across the curve on possible dip buying and despite a large slate of corporate bond issuances.
• The yield on the 2Y UST fell 3 bps to 4.28%, while the 10Y declined 3 bps to 4.41%. Equities rebounded from last week’s losses, with the S&P 500 and Nasdaq up 0.4% and 0.6%, respectively.

• NTPC Green Energy Ltd (2214556D IN) is looking to raise around US$1.2bn in its upcoming India IPO.
• NTPC Green Energy Limited (NGEL) is a renewable energy public sector enterprise and a wholly owned subsidiary of NTPC Limited, a Maharatna central public sector enterprise (PSU).
• In an earlier note, we looked at the firm’s past performance. In this note, we look at its RHP updates, undertake a peer comparison and discuss our thoughts on valuation.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPOs front, the usual year end deal flow appears to be picking up with US elections now out of the way.
• On the placements front, Kansai Electric Power (9503 JP) launched a large primary offering, while Varun Beverages (VBL IN) did the same in India.

• Core shareholders holding 60.86% accepted KKR’s €8.30/share offer, triggering a mandatory tender for minorities. Greenvolt’s revised offer price (€8.3107/share) represented a 95.5% IPO premium, but faced critiques for modest value. 
• By October 25, KKR held 97.64% of Greenvolt’s share capital, surpassing the 90% threshold for a squeeze-out and delisting.
• The delisting is expected by late 2024 or early 2025, following squeeze-out completion. Minority shareholders will be compelled to sell, receiving €8.3107/share. Gross spread is 0.8%. Long.