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Greentech Media: 5 Coronavirus Threats for US Utilities as Earnings Season Kicks Off

Posted by Jeff St. John on Apr 28, 2020

Greentech Media covered how the Utility industry, often thought to be immune to economic declines, is facing challenges due to the COVID-19 crisis, quoting AEE's Lisa Frantzis. Read excerpts below and the entire Greentech Media piece here. 

The coronavirus pandemic is wreaking havoc on the U.S. economy, and while electric utilities may be relatively sheltered from the storm that’s overtaking other economic sectors, they are not immune. In the past month, crashing oil prices have roiled international energy markets and pushed some U.S. oil and natural-gas producers to file for bankruptcy. Meanwhile, electricity demand has taken a dive as businesses and factories have closed down under state orders or economic duress, leading the U.S. Energy Information Administration to predict a 3 percent drop in electricity generation over the course of 2020...

While utilities are generally considered one of the safest investments in economic downturns, the utility sector has been taking on more debt in recent years, and many companies lack the free cash flow to fund ongoing operational costs, Moody’s wrote in a March note. That means they “require continual and generally unfettered market access to maintain adequate liquidity.” So far, it appears that utilities are maintaining their access to debt markets. S&P Global Intelligence tracked $25.7 billion in debt raised by electric utilities and independent power producers in the first quarter, including big raises from Berkshire Hathaway Energy, Dominion Energy, Exelon and FirstEnergy.

“There’s an incredible amount of refinancing of some of the debt that’s out there at very attractive rates,” Lisa Frantzis, head of the Advanced Energy Economy trade group’s utility advisory committee, said in an interview. Last month the Federal Reserve cut interest rates to close to zero to combat the economic downturn. “I don’t think utilities will be in such bad shape as some other sectors,” Frantzis said...

Frantzis of Advanced Energy Economy agreed that “some of the more strategic kinds of investments may have to sit on the back burner a bit longer than expected.” At the same time, “I think they’re going to take this time to move ahead on customer communications, energy efficiency assistance and bill payment assistance...”  

Read the entire Greentech Media piece here. 

Topics: AEE In The News