| Roy Fraser | ||||||
Debt and equity investors have grown up with the notion that utilities are an ideal haven for cash in a crisis. The strategy won't necessarily make you rich, but it's unlikely to make you poorer because, the argument runs, you can always depend on a utility to generate dependable if unexciting returns.
It's time for a new disaster plan. "The concept of utilities as strong companies with a secure credit profile is rapidly disappearing," says Paul Lund, associate director at credit-rating agency Standard&Poor's. Investors who buy utility shares or bonds today should not expect stability, he argues.
The number of cross-border acquisitions, joint ventures and asset disposals in the utilities sector has risen rapidly in the past six months. Investment bankers see plentiful opportunities in Europe. "It's a very active sector and we think this will continue," says Glen Suarez, head of the European utilities group at Morgan Stanley.