Q Stock Performance

Transcription

1 Q Stock Performance HIGHLIGHTS The EEI Index matched the broad market averages in Q1 2009, producing a 11.0% return versus the Dow Jones Industrials 12.5% return and the S&P 500 s 11.0% return. EEI s Regulated group posted an average 11.5% return for the quarter, slightly better than the Mostly Regulated group s 11.9% return and substantially stronger than the Diversified group s 22.8% return. The Regulated group has outperformed for the last three quarters as investors favored financial stability and relatively secure dividends over commodity-pricesensitive earnings and leveraged business strategies in an environment of sharply declining commodity prices and strained credit markets. Power demand has fallen in the face of a severe recession, although prospects for long-term rate base growth and reasonably strong longer-term earnings growth still appear good once the economy recovers. I. Index Comparison (% Return) Index EEI Index Dow Jones Inds S&P Nasdaq Comp.^ *Through March 31, 2009 ^Price gain/loss only. Other indices show total return. Note: Full year, except where noted. II. Category Comparison (% Return) 2009* Index * All Companies Regulated Mostly Regulated Diversified *Through March 31, Note: Returns shown here are unweighted averages of constituent company returns. The EEI Index return shown in Table I above is cap-weighted., SNL Financial and company annual reports. III. Total Return Comparison COMMENTARY Value of $ invested at 12/31/03 close, dividends reinvested. Utility stocks as a group kept pace with the broad market averages in 2009 s first quarter. The EEI Index posted a negative 11.0% return, its third negative quarterly return in a row and the fourth of the past five quarters. The Dow Jones Industrials and S&P 500 returned 12.5% and 11.0%, respectively. The Nasdaq benefitted the most from March s sharp market rally and produced a 3.1% return for the quarter. *Through March 31, Note: Full year, except where noted. 1

2 2 STOCK PERFORMANCE IV. 10-Year Treasury Yield Monthly % Average Monthly Yield, 1/1/00 through 3/31/09 VIII. Returns by Quarter Index Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 EEI Index Dow Jones Ind S&P Nasdaq Comp.^ ^Price gain/loss only. Other indices show total return. Source: U.S. Federal Reserve V. 10-Year Treasury Yield Daily % Daily Yield, 1/1/07 through 3/31/ Category* Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 All Companies Regulated Mostly Regulated Diversified * Returns shown here are unweighted averages of constituent company returns. The EEI Index return shown above is cap-weighted., SNL Financial and company annual reports. IX. Sector Comparison, Trailing 12 mo. Total Return Source: U.S. Federal Reserve VI. Natural Gas Spot Prices $/mmbtu 1/1/05 through 3/31/09, Henry Hub Sector For the twelve-month period ending 3/31/09 Total Return Healthcare -19.2% EEI Index -26.5% Telecommunications -27.3% Technology -28.8% Consumer Services -30.3% Consumer Goods -30.4% Utilities -31.5% Aggregate Index -37.9% Oil & Gas -38.7% Industrials -47.8% Basic Materials -51.4% Financials -58.1% * As defined by WSJ Market Data Group, includes electric, gas, water utilities. Source: EEI and WSJ Market Data Group. X. Sector Comparison, Q Total Return For the three-month period ending 3/31/09 Source: SNL Financial $/mmbtu VII. NYMEX Natural Gas Futures May 2009 through December 2012 Mar 31, 2009 Jun 30, 2008 Dec 31, 2007 Sector Total Return Technology 5.1% Basic Materials -4.3% Consumer Services -5.9% Healthcare -6.8% Telecommunications -7.4% Aggregate Index -10.5% Oil & Gas -10.5% Consumer Goods -10.7% EEI Index % Utilities -11.4% Industrials -18.5% Financials -26.4% * As defined by WSJ Market Data Group, includes electric, gas, water utilities. Source: EEI and WSJ Market Data Group. Source: SNL Financial

3 STOCK PERFORMANCE 3 XI. Market Capitalization at March 31, 2009 (in $ Mil.) Company Stock Symbol Market Cap % Total Exelon Corporation EXC 29, % Southern Company SO 23, % FPL Group, Inc. FPL 20, % Duke Energy Corporation DUK 18, % Dominion Resources, Inc. D 17, % Public Service Enterprise Group Incorporated PEG 14, % PG&E Corporation PCG 13, % Entergy Corporation ETR 12, % FirstEnergy Corp. FE 11, % Sempra Energy SRE 11, % Consolidated Edison, Inc. ED 10, % PPL Corporation PPL 10, % American Electric Power Company, Inc. AEP 10, % Progress Energy, Inc. PGN 9, % Edison International EIX 9, % Xcel Energy Inc. XEL 8, % Ameren Corporation AEE 4, % Wisconsin Energy Corporation WEC 4, % DTE Energy Company DTE 4, % Allegheny Energy, Inc. AYE 3, % Constellation Energy Group, Inc. CEG 3, % SCANA Corporation SCG 3, % CenterPoint Energy, Inc. CNP 3, % NSTAR NST 3, % Northeast Utilities NU 3, % MDU Resources Group, Inc. MDU 2, % Alliant Energy Corporation LNT 2, % NiSource Inc. NI 2, % Pinnacle West Capital Corporation PNW 2, % Company Stock Symbol Market Cap % Total Pepco Holdings, Inc. POM 2, % CMS Energy Corporation CMS 2, % DPL Inc. DPL 2, % TECO Energy, Inc. TE 2, % OGE Energy Corp. OGE 2, % NV Energy, Inc. NVE 2, % Integrys Energy Group, Inc. TEG 1, % Westar Energy, Inc. WR 1, % Vectren Corporation VVC 1, % Great Plains Energy Inc. GXP 1, % Cleco Corporation CNL 1, % Hawaiian Electric Industries, Inc. HE 1, % Portland General Electric Company POR 1, % IDACORP, Inc. IDA 1, % UniSource Energy Corporation UNS 1, % ALLETE, Inc. ALE % Otter Tail Corporation OTTR % NorthWestern Corporation NWE % Avista Corporation AVA % CH Energy Group, Inc. CHG % PNM Resources, Inc. PNM % MGE Energy, Inc. MGEE % Black Hills Corporation BKH % El Paso Electric Company EE % UIL Holdings Corporation UIL % Empire District Electric Company EDE % Central Vermont Public Service Corporation CV % Unitil Corporation UTL % Maine & Maritimes Corporation MAM % Total Industry 316, % and Wall Street Journal XII. EEI Index Market Capitalization (at Period End) $ Billions Note: Change in EEI Index market capitalization reflects the impact of buyout and spin-off activity in addition to stock market performance. and Wall Street Journal EEI Index Market Cap (in $Billions) Q ,808 Q ,484 Q ,546 Q ,035 Q ,200 Q ,668 Q ,238 Q ,331 Q ,553 Q ,598 Q ,454 Q ,073 Q ,324 Q ,601 Q ,193 Q ,460 Q ,305 Q ,663 Q ,989 Q ,727 Q ,825 Q ,899 Q ,848 Q ,281 Q ,858 Q ,088 Q ,565 Q ,946 Q ,486 Q ,711 Q ,024 Q ,472 Q ,921 Q ,070

4 4 STOCK PERFORMANCE XIII. Comparative Category Total Annual Returns, Value of $ invested at close on 12/31/2003 Annual Returns * EEI Index Annual Return (%) (20.93) (12.61) EEI Index Cumulative Return ($) Regulated EEI Index Annual Return (15.59) (11.50) Regulated EEI Index Cumulative Return Mostly Regulated EEI Index Annual Return (27.00) (11.91) Mostly Regulated EEI Index Cumulative Return Diversified EEI Index Annual Return (33.90) (22.84) DiversifiedEEI Index Cumulative Return * At March 31, 2009 Note: Returns shown above are unweighted averages of constituent company returns. Regulated Companies Outperform Again As shown in Chart VIII, EEI s Regulated group posted an average 11.5% return for the first quarter, slightly better than the Mostly Regulated group s 11.9% return and substantially stronger than the Diversified group s 22.8% return. The Regulated group outperformed for the third straight quarter as investors preferred the relatively stable dividends and more predictable earnings offered by the regulated business model over competitive generators commodity price sensitive earnings and generally more leveraged balance sheets in an environment of falling commodity prices and very strained credit markets. As shown in Chart VI, natural gas spot prices fell to multi-year lows during Q1, fully reversing their run up to multi-year highs in And at the end of March 2009, the natural gas futures curve had fallen nearly $4 from its level of mid The stronger performance of Regulated companies is also evident in Table XIV, as seven of the top ten performing XIV. EEI Index Top Ten Performers For the 3-month period ending 3/31/09 Company Category % Return CMS Energy Corporation R 18.3 Sempra Energy MR 9.4 Consolidated Edison, Inc. R 3.3 Public Service Enterprise Group Incorporated MR 2.2 FPL Group, Inc. MR 1.7 Xcel Energy Inc. R 1.7 DPL Inc. R (0.1) PG&E Corporation R (0.2) Unitil Corporation R (1.1) Wisconsin Energy Corporation R (1.1) Note: Return figures include capital gains and dividends. R = Regulated, MR = Mostly Regulated, D = Diversified

5 STOCK PERFORMANCE 5 stocks in the EEI Index in Q1 were in the Regulated catgory. However, to place this performance in a broader context, the Mostly Regulated and Diversified groups outperformed the Regulated group in 2003, 2004, 2005 and Each group offers investors a somewhat different risk and return profile, and their changing performance patterns illustrate changing investor preferences in relation to the broader trends taking place in the industry s structure and organization as well as in global financial and commodity markets. Dividends at Risk? Many corporations across all business sectors have cut dividends in recent months in response to the turmoil in global credit markets and the economic recession. Given elevated capex spending across much of the utility industry and slightly lower power demand relative to last year, dividend cuts also emerged as a concern for utility investors in Q1 as three utilities cut their dividend in mid-february whereas the prior five years saw only four total cuts. Moreover, earnings guidance has been revised downward by many utilities in recent months. Yet the first quarter also saw 18 dividend raises. While dividend cuts may yet become a necessity for more companies, depending on the strength of the economy later this year and into 2010, industry analysts generally commented during Q1 that most dividends appear safe and that fears of cuts probably overstated probabilities. The changed economic landscape since mid-2008 has diminished the industry s near-term earnings prospects and (as is the case for many other industries) raised its overall cost of capital. Yet there is virtual unanimity across the political and regulatory spectrum on the need for healthy electric utilities and affordable, reliable electric power for American families and businesses. This should translate into the ongoing availability of the capital necessary to fund rate base growth and general operating needs, provided investors receive fair treatment from state politicians and regulators. However, the current strained economic landscape makes constructive regulatory relations especially important for utilities and ratepayers alike. Analysts continue to believe that many regulated companies offer potential for high single-digit earnings growth once the economy recovers, a welcome scenario for investors concerned about the very survival of companies in other areas of the economy. This positive long-term outlook and the industry s attractive dividend yields will likely continue to appeal to investors in today s difficult economic environment. XV. Share Ownership by Investor Category (% of total) Institutional Retail Insider Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Institutional Insider Retail Total Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Institutional Insider Retail Total.0.0 Jun Sep Mar Source: SNL Financial and EEI Finance Department. Note: Institutional figures represent end-of-quarter, unweighted average of the 61 publicly traded EEI Index companies. Insider data reported annually. Retail data defined as % - (Institutional data % + Insider %). Totals may not add to due to rounding.