PUHCA reform ... has its day finally arived?

Includes: CIN, DUK, EXC, PEG
by: Sandy Cohen

According to some reports, key memebers of Congress may actually have finally reached an agreement to repeal the Public Utility Holding Company Act (PUHCA) of 1935.  If this actually holds this time, it would potentially open the door to aloow the freer flow of investment capital into the utility industry.  This flow of capital could lead to other industries (energy) and other players who traditionally have not been free to invest in the utility industry to make acquistions of utilities.

The following link is an article about the potential agreement: TheDeal.com Article on PUHCA Repeal.

The most immediate effect of the repeal of PUHCA, should it occur, would be to ease the approval process of 3 M&A deals currently announced and in process of beaing appealed:  The Excelon-Public Service Enterprise Group merger, the Cinergy-Duke Energy merger, and the proposed acquisition of Pacificorp from Scottish Power by MidAmerica Energy (owned by Warren Buffet).

An interesting sidebar is that the agreement may give the Federal Energy Regulatory Commssion greater authority to review mergers, including market power issues, amongst other issues.

Should the repeal PUHCA occur, the first reaction in the stock market will be to speculate on which utilities would be the most likely takeover targets.  One idea?  Single state utilities (just one State regulatory approval then needed) that are mid-sized and have very high payout ratios (a high portion of EPS paid out in dividends would free up cash for the acquiror).  Older senior management would be a flag also.

More to come over the next few weeks!