The costs cited by MDU include new pollution controls at power plants in Sidney, Montana, and Big Stone City, South Dakota; a newly constructed $77 million gas plant near Mandan, North Dakota; a $220 million wind farm in North Dakota and two small natural gas plants in Sidney.
PSC Commissioner Kirk Bushman said the five-member panel will look closely at those projects as it considers the rate hike. Bushman said some increase was likely.
“We can’t just say, ‘You can’t raise rates,'” Bushman said. “If they can show under reasonable circumstances they had to build out and invest so much in their infrastructure, by law they’re allowed to recover” those costs from customers.
When the rate increase was first announced last year, it included a fee for some customers who use their own wind or solar power. That provision was dropped under an agreement between MDU and a group known as The Alliance for Solar Choice, which intervened in the case.
Utility reduces steep rate increase for Montana customers
MATTHEW BROWN | Associated Press
BILLINGS, Mont. (AP) — A utility serving 26,000 eastern Montana customers scaled back its proposal for a steep rate hike on Monday, just a day before the matter was scheduled to go before state regulators for a public hearing.
Montana-Dakota Utilities Co. planned to file a new application with the Montana Public Service Commission reducing the proposed rate hike from 21 percent to 13.3 percent, spokesman Mark Hanson said.
The change came after the Montana Consumer Counsel and a group representing large electricity customers had objected to the increase.
“This is a fair settlement for the company and our customers,” Hanson said. He added that the smaller rate hike means the utility will be able to take in less revenue than it needs.
The utility has said it needs to cover costs that include its share of $400 million in pollution controls at coal plants in Montana and South Dakota.
A public hearing on the company’s request is scheduled to begin Tuesday before the Public Service Commission at the Dawson County Courthouse in Glendive. It’s expected to last several days.
Commissioners in December rejected an interim increase sought by MDU, saying they needed to study the matter further. A final order is due by March 25.
The 13 percent increase would be phased in over two years and cost residential customers on average $6.38 per month. It would bring in about $7.4 million annually in additional revenue for MDU, Hanson said.
A 21-percent increase would have cost customers $14.80 per month on average and generated about $11.8 million annually.
“It’s a good outcome for customers,” said Dennis Lopach, an attorney for the Consumer Counsel, which negotiated with MDU to lower the increase.
The Consumer Counsel has said previously that MDU’s proposal was excessive and based on flawed projections of how fast its assets would lose value in coming years.
ITC will continue as a stand-alone transmission company, according to the statement. Fortis, the biggest Canadian utility owner by market value, plans to retain all of ITC’s employees and maintain corporate headquarters in Novi.
Federal regulators set ITC’s profit on investments, typically allowing a higher return than states overseeing power suppliers do, according to Bloomberg Intelligence analyst Stacy Nemeroff. While the Federal Energy Regulatory Commission is considering cutting transmission-line rates for some customers, ITC’s returns will probably remain above-average, Nemeroff said by e-mail Jan. 26.
ITC owns and operates 15,600 miles (25,100 kilometers) of high-voltage lines in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma. The lines can deliver more than 26,000 megawatts, according to its website. That’s enough power for 20.8 million average U.S. homes, according to its website. The company plans to invest about $3 billion in new lines and improvements through 2018, a November investor presentation shows.
Fortis to Buy Power-Line Operator ITC for $6.9 Billion
by Matthew Monks Jim Polson
Fortis Inc. of Canada agreed to buy ITC Holdings Corp., the transmission-line owner with the highest rate of return among U.S. electric utility owners, for $6.9 billion in cash and stock to add stable, regulated returns.
Fortis, a power and natural gas distributor based in St. John’s, Newfoundland, will pay the equivalent of $44.90 for each ITC share, according to a statement issued on Tuesday. That’s a 14 percent premium to Monday’s close, and a 33 percent premium to the close on Nov. 27, before Bloomberg reported that ITC was exploring a sale. The offer, which totals $11.3 billion including assumed debt, will comprise $22.57 in cash and 0.752 Fortis shares.
The sale comes as power companies, grappling with flat electricity demand and rising capital costs, seek deals in other areas promising better growth. Southern Co. is buying natural-gas distributor AGL Resources Inc. for about $8 billion in cash and Duke Energy Corp. is buying Piedmont Natural Gas Co. for about $4.9 billion.
"Fortis has grown its business through strategic acquisitions,” Chief Executive Officer Barry Perry said in the statement. “The acquisition of ITC – a premier pure-play transmission utility – is a continuation of this growth strategy.”
Novi, Michigan-based ITC earned an adjusted return on equity of more than 17 percent in 2014, above the 11 percent average of its peers including Consolidated Edison Inc. and Sempra Energy, data compiled by Bloomberg show. It’s the only publicly-traded U.S. company that owns only transmission lines.
Fortis intends to sell $2 billion of debt and as much as 19.9 percent of ITC to other investors to finance the cash portion of the deal, according to the statement.
The driver wasn’t seriously injured and that stretch of road has since been repaired, but the incident set off some alarm bells about the pavement’s condition.
MnDOT is planning additional improvements in the I-35 corridor north of the Twin Cities in the next one to three years. Upcoming projects include:
An estimated $19 million bituminous surface replacement on a 9.3-mile stretch of I-35 in the Willow River-Sturgeon Lake area (2017 construction). And a $30 million, two-year unbonded concrete overlay and bridge replacement project from the Snake River to the Pine County/Chisago County line (2018 and 2019 construction, if funding is available).
The 2016 project calls for pavement work on the northbound and southbound lanes, lighting, and replacement of two bridges just south of Hinckley.
The project area sees about 23,300 vehicles per day. Two lanes of traffic will be maintained during construction, but Dwyer said motorists are urged to use alternative routes, such as County Road 61.
Weather permitting, construction is expected to begin in April and end by late October.
Funding sources include $4 million in federal money; the rest is being paid for by the state.
Other bidders were St. Michael-based PCI Roads ($27.757 million), St. Cloud-based Landwehr Construction ($29.28 million), and Shafer-based Shafer Contracting ($29.38 million).
From Finance & Commerce (Minneapolis, MN)
Knife River is apparent low bidder for I-35 work
BYLINE: Brian Johnson
A roughed-up stretch of Interstate 35 north of the Twin Cities is headed for a major overhaul this year, the latest in a series of projects intended to upgrade deteriorating 1960s-era pavement within that busy corridor.
On Friday, Knife River Corp., based in Bismarck, North Dakota, submitted the apparent low bid of $27 million to do pavement, lighting and bridge work on an 11-mile segment of I-35 extending roughly from Pine City to Hinckley.
Roberta Dwyer, the Minnesota Department of Transportation’s I-35 project manager, said the bid was within MnDOT’s $25 million to $30 million estimate. The work will take place entirely during the 2016 construction season.
The pavement is overdue for replacement. Some of the driving surface was constructed in 1961 and opened to traffic in 1962. Crews had done some patching over the years, but Dwyer said it’s time for a longer-term repair.
“Pavement life is estimated at 40 years and that is well beyond 40,” Dwyer said. “It’s like the roof on your house; you can patch it only so many times before you have to replace it. ”
Matt Zeller, executive director of the Concrete Paving Association of Minnesota, said the unbonded concrete overlays included in the upcoming project are about a 35-year fix, as opposed to an eight- to 12-year design life for less extensive repair options.
“They do get a lot of bang for their buck on these jobs. … Those are the bread-and-butter of the interstate repairs in Minnesota,” Zeller said.
Deteriorating pavement on I-35 north of Twin Cities has been a concern for years.
In 2011, as Finance & Commerce previously reported, a motorist was driving on the interstate about 12 miles north of Hinckley when a passing vehicle launched a loose chunk of concrete from the pavement through her windshield.
It is the realization that the investment horizon is long and that it is continuously receding that leads us in the direction of a correct asset allocation. And that means we should not reduce exposure to the stock market as we age.
But what is the correct allocation between stocks and bonds? My answer to that question will come next week.
David A. Levine is a former chief economist at Sanford C. Bernstein & Company, now a unit of AllianceBernstein, who also founded and ran the firm’s fixed-income department.
At 87, the average woman can expect to live another six to seven years — a healthy woman, even longer. And she might get “unlucky” and live to be 100, in which case her assets will need to support a retirement of 34 years.
The prudent course for any retiree is to plan on a longer-than-normal life. Retirees typically liquidate only a small portion of their assets every year. Accordingly, the mere act of retiring should not prompt any change in your exposure to the financial asset — common stock — that is almost certain to produce the highest returns over the long run.
But what if there’s a bear market? “No big deal,” I say. As long as you don’t panic and sell most of your holdings at the worst times, your annual withdrawals are limited. As a result, you should not really worry about fluctuations in the stock market.
Not worry about the volatility of the market? True enough, sometimes you’ll be selling when the stock market is depressed, but at other times you’ll be selling when the stock market is elevated.
On average, you’ll be liquidating your positions at average prices and, over time, you will earn the average performance of the stock market. And the long-established truth is that a diversified collection of stocks, over most any reasonable time period, will outperform the average performance of bonds.
But what happens when our healthy, vigorous retiree gets to be 99? Surely there is not much time left. That is true: She is fast approaching her personal horizon. But her assets have not reached their horizon. They will be bequeathed to her children, or other relatives and friends, perhaps a few favorite charities — extending the horizon anew.
I can count on one hand the number of people who have said to me that they don’t care about any relatives, friends or charities and that it is their intention to spend all of their money — ideally running the balance down to zero — on the day they die.
Assuming all of us followed the preferred allocation, our family’s financial assets would collectively be less than 50 percent equities because my wife and I have a lot more money than our children. But if we died in a plane crash tomorrow, and the children inherited our money, the recommendation for how to allocate those same assets would shoot up to 90 percent stocks.
Isn’t that a little strange?
I’m not picking on Vanguard; I hold most of my investments in Vanguard index funds and their recommendations mirror what the rest of the industry preaches. Indeed, the “target-date funds” of Vanguard, Fidelity, BlackRock and the Capital Group all allocate 84 to 97 percent stocks for people who plan to retire in 2045 versus 52 to 61 percent for those planning to retire in 2020.
I asked Maria Bruno, a senior analyst specializing in retirement-related strategies for Vanguard, to explain the reasoning behind those allocations. “As you age and your time horizon shortens, you need to diversify by increasing your exposure to bonds,” she said. “This will help mitigate the short-term volatility of your portfolio that derives mainly from the equity component.”
This consensus view, though, rests on a fallacy: the belief that as people grow older, their investment horizon shortens and, therefore, their ability to withstand volatility diminishes considerably.
I would argue, instead, that there is an insufficient appreciation of just how apt the metaphor of the “investment horizon” is. Just as a sailor sees but never reaches the horizon, the same is true for nearly all investors.
A just-retired 66-year-old might expect that her assets will need to support her for a further life expectancy of only 20 to 21 years. But what happens if she treats that actuarial expectation as a certainty, spends too much each year, and ends up healthy and vigorous at age 87 with no assets left?
From NY Times
Why Your Portfolio Needs Plenty of Stocks, Whatever Your Age
By DAVID A. LEVINE
WHEN I went to work on Wall Street in 1972, it was an article of faith that older investors should own less common stock than young ones. One rule of thumb suggested that your equity exposure should equal 100 percent minus your age: 70 percent for a 30-year-old, for example, but just 35 percent for someone who is 65.
Since then, investment practices have evolved considerably, but on the question of how much common stock to own — the single most important question governing investment returns — not much has changed.
Typical recommendations nowadays propose greater equity exposure than they did 40 years ago, but it is still the overwhelming view among investment counselors that people should reduce their holdings of common stock and beef up their ownership of bonds as they grow older.
Problem is, it wasn’t very good advice back then, and it’s still poor advice today.
I know this opinion puts me in the minority, but if you are a retiree or nearing retirement, you should hear me out.
Let’s begin with the standard view today.
Customer representatives at Vanguard, one of the largest investment managers in the world, generally refrain from offering unsolicited financial advice. Still, when you log in to your account at Vanguard, you will see two pie charts. One shows your current asset allocation and one shows what Vanguard’s algorithm (based solely on your age) thinks that allocation should be. Something similar is suggested by most other investment firms and financial advisers.
If you happen to be like my daughter or son — both in their mid-30s — Vanguard will propose a target asset allocation that is 90 percent stocks and 10 percent bonds. For a 69-year-old like me, however, the default suggestion is 45 percent stocks and 55 percent bonds. Vanguard offers a disclaimer noting that it has not taken “personal circumstances” into consideration.
Expectations for a rate increase at the Federal Reserve’s next meeting in March have diminished in recent weeks, and utilities have rallied in tandem.
Additionally, investors say, utility and telecom stocks tend to be tied to the U.S. economy and so they’re not as susceptible to slowing demand in Europe and Asia.
MARKETS & FINANCE
As Stocks Fall, Utilities Are Having Their Time in the Sun
By Saumya Vaishampayan
Utility shares are rallying this year, underscoring the pessimism in the broader market.
Utilities in the S&P 500 have advanced 7.5% so far in 2016. The only other sector to gain this year is the telecommunications sector.
It’s not unusual that these stocks, which are viewed as more defensive bets, have rallied as the broader S&P 500 has dropped 6.7% this year. Investors have snapped up stocks that tend to pay out high dividends and post dependable earnings as they search for income in a low-rate world. Telecom stocks have the highest average dividend yield among S&P 500 sectors, followed by the utilities and energy sectors, according to FactSet.
Jack Caffrey, equity portfolio manager at J.P. Morgan Private Bank, said he’s been overweight utilities for about five years in his more defensively oriented portfolio. “In the battle of the tortoise and the hare, utilities can be tortoise-like, but it’s nice to remember that the tortoise has a shell,” he said.
The utilities sector includes shares of companies like Duke Energy Corp an electric power holding company, and Consolidated Edison Inc which provides electric service to parts of metropolitan New York.
“Investors looking for yield have kind of crowded into that space,” said Amir Madden, portfolio manager on GAM’s Alternative Investments Solutions team.
But the cautious attitude among investors could be preventing a broader rally, amid concerns about whether a slowdown overseas could crimp growth in the U.S. “The leadership would have to change to more aggressive areas like tech or industrials if we’re going to have a new leg up,” said Bruce Bittles, chief investment strategist at Robert W. Baird & Co.
Part of the reason for the gains in the utilities sector this year is the degree to which the stocks have become a bet on low interest rates.
Increased Construction Activity Boosts Vulcan Materials
Producer of construction materials expects demand for its services to increase 7% for the year
By Austen Hufford
Vulcan Materials Co. posted sales and profit gains in its latest quarter as the recovery in construction activity continued.
Shares rose 6.3% to $93.54 in early trading as results topped Wall Street expectations.
Vulcan, which produces and distributes construction materials, said it expects demand for its services to increase 7% for the year. It expects private construction will be driven by double-digit growth in private homes and public construction will be boosted by the passage of a federal highway bill by Congress.
The Birmingham, Ala.-based company has also been expanding through a string of bolt-on deals including in Arizona, New Mexico and Tennessee last year.
For the fourth quarter, aggregate freight-adjusted revenue grew 20% to $545 million as shipments increased 8%. Freight-adjusted average sales prices grew 11%.
Vulcan’s asphalt segment had a 3.7% revenue increase, while concrete fell 16% and calcium declined 13%.
Over all, the company posted a profit of $88.9 million, or 65 cents a share, up from $38 million, or 28 cents a share a year earlier. Revenue increased 14% to $857.3 million.
Analysts surveyed by Thomson Reuters had forecast per-share earnings of 61 cents a share on revenue of $879 million.
don haven't had time to look at the conference call transcript. I am interested to read the analysts following MDU, the whale and Challey (Yawn) questions of management.
my Jan 23rd partial post from a news release out of Gov. Sandoval's office had this reference below. you may google the headline for the entire article, or go over to IV board where the entire release is.
perhaps if you google Nevada Valley Solar Solutions II some more information will appear?
* Nevada Valley Solar Solutions II, a nameplate 15 MW community solar project being built by MDU Resource (Bombard Renewables) in Nye County for the benefit of Valley Electric Association. GOE approved a $4.8 million incentive for the project in November 2015. The expected benefit to Nevada is $43 million in capital improvements, payroll, and taxes paid, representing a 9-to-1 return on Nevada's investment.
Questar’s pipeline network, which Dominion intends to sell to its publicly traded unit Dominion Midstream LP over two years, was a bigger attraction than its utility, Farrell said.
Although there will be more takeovers, they may not be numerous, Rhame said.
“Valuations are high, and investors punished the stocks of Duke and Southern,” he said. The prime targets, Atmos and NiSource, each operate in more than a half-dozen states. “It’s a lot of work to get seven or eight separate state approvals.”
Atmos’ investor relations office didn’t immediately respond to a telephone request for comment.
NiSource fell 0.2 percent on Tuesday to close at $21.26 in New York. Atmos rose 1.9 percent to $69.90.
Meantime, the market signaled expectations that Questar may fetch a higher bid. The stock closed at $24.98, within 2 cents for a second day of the $25 a share Dominion offered. Traders typically discount from the takeover price when they expect a deal to close as agreed, according to Bloomberg Intelligence analyst Kit Konolige.
The surge in value didn’t prevent Duke, the largest U.S. utility owner, from paying about $4.9 billion in cash, a 40 percent premium to the prior close, for Piedmont Natural Gas Co. in October. Dominion’s price for Questar, about a 23 percent premium to the previous close, shows buyers and sellers can still reach agreement in the sector, Worms said.
“Gas companies have more growth opportunities,” Jay Rhame, who manages the Reaves Utilities ETF in Jersey City, New Jersey, said by phone Monday. “A lot of the gas systems were built out 50 or 60 years ago. They need replacement work and a lot of state commissions have been positive on safety-like spending.”
That’s translated into profit-growth forecasts of 6 percent to 8 percent a year among gas utilities while electric utilities are predicting annual growth of 4 percent to 6 percent, Rhame said. “Small differences, but enough to make the big acquisition work.”
Atmos and NiSource, each with a market value of about $7 billion, are the most likely targets for a buyer wanting a deal large enough to improve its bottom line, Rhame said.
The round of power-on-gas utility takeovers began in May 2013 when Teco Energy Inc., owner of the electric utility in Tampa, Florida, agreed to buy New Mexico Gas Co. for $950 million in cash. Since then, at least five deals with an enterprise value of about $28 billion have been announced, according to data compiled by Bloomberg.
Two Gas Utilities Seen Joining Questar as Takeover Targets
by Jim Polson
The scramble among power companies to snap up natural-gas businesses for their stable returns is far from over, with Dominion Resources Inc. saying Monday that it’ll buy Questar Corp. for $4.4 billion. The only question now: Who’s next?
Atmos Energy Corp. and NiSource Inc. may be next to sell, BMO Capital Markets analyst Michael Worms said by phone Monday. Exelon Corp., the biggest U.S. nuclear generator, or NextEra Energy Inc., the biggest U.S. wind-power developer, may be next to announce a takeover, said Worms, who correctly forecast in September that Dominion and Duke Energy Corp. would buy gas utilities and that Questar would be sold.
Driving the deals are a conviction that natural gas demand will rise as it remains abundant and cheap, replacing coal as the cleaner-burning fossil fuel of choice in power plants. There’s also speculation that flat demand for electricity won’t improve. Dominion expects the almost $900 million premium it’s paying for Questar to be covered by expansions, as states such as Utah and Wyoming convert from coal to gas for power generation, Dominion Chief Executive Officer Thomas Farrell told investors on a Monday call.
“There’s more coming after this one,” said Worms. “Gas utilities, many of them, are in the process of replacing aging pipes. That’s incremental capex. Buyers are diversifying their electric business by diversifying into another regulated business.”
And they are paying for the privilege. Southern Co. agreed to a 38 percent premium to the previous closing price for AGL Resources Inc. in August, driving up the value of gas utilities. The S&P 500 Gas Utilities Index surged 28 percent, the most in at least 26 years, the day Southern announced the takeover, and it had outperformed the index of electric utility stocks since 2009.
Spokesmen for Exelon, NextEra and NiSource declined to comment.
Deutsche Bank fixed income analysts said last week that given dollar strength, the selloff in stocks and the widening of credit spreads so far this year, their financial conditions index “is now firmly at levels consistent with recession,” and is likely to continue to deteriorate as global liquidity declines.
Based on their analysis of Treasury yield spreads, adjusted for current artificially low yields, they place the probability of a recession in the next 12 months at 46%. That’s well above the Federal Reserve’s model, which estimates a 4% probability of recession.
Also last week, Goldman Sachs gave investors a blueprint to follow if the economy suffered a recession in 2016, and Credit Suisse revisited lessons learned from past recessions.
Recession risks warn of ‘severe’ drop in the stock market
By Tomi Kilgore Reporter
Another brokerage firm has used the “R” word on Tuesday, warning investors to wake up to the idea that rising risks of a recession could send the stock market over a steep cliff.
Based on current valuations, the prices of most stocks don’t appear to have factored in a recession scenario, “hence the downside should we see a recession could be rather severe,” RBC Capital Markets’ global equity team wrote in a research note to clients.
Applying a stress test to their coverage universe, using worst-case, price-to-earnings valuations seen during the 2008-to-2009 recession, RBC analysts said they believe the shares of most companies could still fall another 50% or more from current levels.
The concern for RBC analysts stems from the recently volatility in the stock market, caused by macro weakness, softness in China and commodity market challenges.
On Monday, Deutsche Bank strategist David Bianco said the second-half of 2015 was “clearly a profit recession” for S&P 500 companies, and suggested it probably won’t be until the second half of this year that “healthy” growth returns.
Nearly half of S&P 500 companies have now reported fourth-quarter results through Tuesday morning, and earnings-per-share is headed for a 5.8% decline on the year, according to FactSet, compared with an estimated 5.7% decline as of Friday. That’s the data provider’s blended growth rate, which combines those companies that have reported with the estimates for the rest.
That would be the third-straight quarter of an EPS decline, the longest such streak since the Great Recession.
Among Tuesday’s culprits for the earnings decline, Exxon Mobil Corp reported a 58% profit plunge and Pfizer Inc reported a 50% earnings drop. Royal Caribbean Cruises reported earnings that nearly doubled, but the stock plunged 16% after the company provided a weak first-quarter outlook.
rorygu, weak market today but your CPK is moving up....
regulated nat gas companies are the hot investments now...