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A comparative analysis of return on equity of natural gas utilities

14 Jun 2007

As a result of the interplay between the Canadian and U. S. markets, Canadian utilities compete for capital essentially on the same basis as utilities in the U. S. In the current market environment, no fundamental differences were identified that would indicate a significant difference in investor required returns between the two markets. [...] Justice Lamont in that case: The duty of the Board was to fix fair and reasonable rates; rates which, under the circumstances, would be fair to the consumer on the one hand, and which, on the other hand, would secure to the company a fair return for the capital invested. [...] In 2000/2001, Ofgem set the cost of capital (utilizing the CAPM method to calculate the equity return component of the cost of capital) for the only gas distribution company existing as of that date (National Grid). [...] While in most instances the regulatory commissions focus on the overall cost of capital (as opposed to separately reporting the debt and equity returns, along with the capital structure), it is possible to apply the CAPM to calculate the implicit ROE utilizing the given parameters, as provided in Table 4. Netherlands In the Netherlands, there are 12 regional gas network companies, the vast majorit [...] For example, the DCF approach is the predominant approach for setting ROEs in the U. S. Under this approach, the ROE is determined by adding the expected dividend yield to the long term projected growth in dividends.
economics economy finance natural gas interest rate inflation investment business dividends interest investments prices securities cost of capital credit rating financial economics business finance economy, business and finance market and exchange investor beta beta (finance) capital asset pricing model dividend bond (finance) ofgem yields standard & poor’s gas companies
Pages
74
Published in
Canada

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