Quote:
Originally Posted by DoubleK
The utilities would argue that the equity thickness (37%) and the generic cost of capital (8.25% if memory serves) are both too low. My opinion is they need to be juicy enough to incent investment but contrasted with managing the risk in the event of insolvency.
I do believe Berkshire has been good for Albertans as they have a much better reach than SNC did into capital markets and by far a much better public reputation. That said, they aren't dumb and know a good deal when they see it. I do not believe for one second that they overpaid for AltaLink, there were other bidders, we just don't know exactly who they were. We only know that SNC agreed to sell to Berkshire.
I left AltaLink in September for greener pastures. Nothing I've posted would be considered 'inside information', everything I posted is publicly available.
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The equity thickness piece you can argue either way based on risk tolerance.
But any argument for higher ROE is basically founded on, "we think our customers should pay us more money." I'd like that in my business also.
But AB regulated transmission assets all trade for a price to book value of >1, which means the ROE is so attractive investors are willing to pay more than $1 for a dollar of alberta transmission assets. As long as that remains true the ROE should be declining not increasing, because that means there would be no issue attracting capital for new investments.
Also, I wasn't saying BHE overpaid for Altalink, quite the opposite. They're shrewd investors and wouldn't overpay. Since they're willing to pay more than the assets regulated cost base that implies Altalink is getting too good a deal from power consumers and their return on equity could be dialed back to benefit consumers.