Nuclear power will come to an end in the U.S. if the industry fails to obtain more government support, Carlyle Group predicts.
U.S. nuclear reactors need more subsidies to keep running, such as a federal carbon tax that would reward them for their zero-emissions power, according to Bob Mancini, co-head of Carlyle's power unit.
Mancini points to measures approved in New York as an example of the kind of help nuclear power plant owners will need to survive; in August, NY state regulators cleared ~$500M/year in subsidies as part of a clean energy plan to reduce greenhouse gas emissions.
Great Plains Energy’s (GXP -0.8%) proposed $8.6B purchase of Westar Energy (WR -0.1%) is being closely examined by Missouri regulators, who could derail the deal even as GXP says it does not need the state’s permission for the merger.
James Owen of the Missouri Office of Public Counsel contends that an earlier agreement between GXP and the state 15 years ago still requires any acquisition by the company to fall under Missouri jurisdiction.
Owens also notes that WR has operations in Missouri as part owner of a power company in Joplin, which means it is subject to the state’s oversight.
Westar Energy (WR -1.4%) disclosed late yesterday that its $8.6B proposed takeover by Great Plains Energy (GXP -0.7%) is being investigated by the U.S. Justice Department.
WR said it received a letter from the DoJ in June requesting “certain documents and information" on a voluntary basis; the two companies say they are cooperating.
The disclosure comes less than a week after the staff of Missouri’s utility commission said the merger should be subject to a state review, threatening to hold up a transaction that WR and GXP have been expecting to close by the middle of next year.
WR also reported yesterday that its Q2 earnings missed expectations while reaffirming FY 2016 guidance for EPS of $2.38-$2.53, vs. $2.45 analyst consensus estimate.
Great Plains Energy (GXP -1.9%) is downgraded to Underweight from Equal Weight with a $28 price target at Barclays, which foresees regulatory and financing hurdles associated with closing its proposed $8.6B acquisition of Westar Energy (WR +0.2%).
While GXP’s guidance is “defensible,” the regulatory calendar is very crowded and “the high sensitivity to financing costs the transaction employs through a great deal of leverage will cause the stock to underperform the utility group into the close of the transaction," Barclays analyst Daniel Ford writes.
The firm has an Equal Weight rating on WR and a $60 price target, assuming the merger closes within 12 months.
Ameren (AEE -0.2%) is preparing to make a final takeover offer for Westar Energy (WR +0.5%), which has asked interested suitors to submit binding offers by May 23, Bloomberg reports.
Great Plains Energy (GXP +0.2%) also may be interested in WR and has been seeking to partner with a financial investor such as a pension fund or infrastructure fund to help raise the cash necessary to buy its larger rival, according to the report.
WR, the largest utility in Kansas, reportedly has been considering a sale amid a flurry of U.S. utilities mergers prompted by tepid power demand and mounting costs.