Strap Cap

a little this, a little that

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@ShanuMathew93 Resi rate % increase artificially inflated…meaningful rate lag/under-earning in AZ currently

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@JaneAFlegal lets cut earnings 60% b/c it's a low risk sector...let's see how low risk the equity market will price them after that...

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@EnergyLawJeff what other option is there though? Customers certainly dont feel protected right now and the competition has effectively bowed out? Unless the RBA is successful (call me skeptical), re-reg has to be on the table...

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@JesseJenkins short $ATO

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@BloombergME @JaneAFlegal the issue in TX is not ROE, it's capex prudency (especially the gas utes)...TX ROEs are below avg and TX utes have among the lowest authorized equity ratios...

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@EnergyLawJeff @JaneAFlegal There's an irony in ppl calling for cutting utility ROEs 200-300 bps, which on a ~10% base ROE is a 20-30% earnings cut (on a highly levered capital structure!), and then justify it by saying utilities are low risk!

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@MichaelGiberso3 I don’t actually disagree with that…but this is again a different conversation and would be the case regardless of what the allowed ROE is

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@MichaelGiberso3 Hence why I caveated my response w/ “if it’s needed” … that q is beyond the scope of your initial tweet … my point is that it’s useful to consider why IPPs aren’t building and what will incentivize a buildout … the answer will take you to a diff place than “Ute ROEs too high”

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@kchan55 I agree regulated entities should have lower allowed ROIC, but the IOU competition for capital is other US equities, which earn much higher ROIC and spreads vs CoC…the “too high ROE” argument essentially frames it as if the competition is bonds. ROIC>WACC to compete for capital

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@TKavulla @mattyglesias Buybacks? Bankruptcies? Come on, this isn’t a fair comparison

Regulated utilities are among the most levered businesses in the US

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@kchan55 Think the ROE argument is wildly overstated…Every single publicly traded equity in the market aims for ROIC > cost of capital…the value creation spread for utilities is actually tighter than most other businesses…and if you cut ROEs, the cost of capital will likely go up

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@Suicide95518428 Knife fight for Permian G&P…they’re doing a great job, but if they don’t spend it someone else will and take mkt share

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@BillBrewsterTBB @RagingVentures Among the least shareholder friendly of MLPs/midstreamers…over-earning…asset quality and balance sheet gap vs peers has narrowed…poor recent execution…sleepy mgmt…

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@cap_zay CAD utilities yes (esp H), renewables yes, utilities growing EPS <8% yes...otherwise there is still value ...regulatory pressure is far less than ppl think for higher growth names

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👀

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$KMI is still in the penalty box for all those deals in 2021-22 but $WMB seems to be getting a pass for doing even more unnecessary M&A?

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@xiaowang1984 @JesseJenkins @Meta Yes, fair

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@xiaowang1984 @JesseJenkins @Meta Pre nuclear PTC…

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@xiaowang1984 @JesseJenkins @Meta I mean the strong show of support in the press release (Shapiro, OH/PA senators)+ C Wright at the press conference lauding the deal. They are going out of their way to support this as if they don’t fully understand the impact. Not referring to the technical logistics of it all

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@xiaowang1984 @JesseJenkins @Meta I don’t disagree. Just surprising in a big election year where utility bills are a key issue that this gets state+federal “blessing” (did they actually think these plants were at risk of retiring?). I don’t believe META even announced a new data center associated with this deal