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Originally Posted by bizaro86
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.
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There are a few reasons that paying a premium to rate base makes sense and it’s not because the equity thickness and ROE are too high. In many cases it’s because you see rate base growth, you are buying the growth with the premium. You can’t squeeze roe much more, or equity thickness for that matter, this high interest rate period has shown the pressure that puts in place. It’s not as if Alberta’s roe is out of step with other jurisdiction and there’s almost no regulated rate assets that have sold near the rate base in the world, let alone Alberta.