TXU Competitor Line-Up: Before & After (2)

Stock Tickers: TXU, DUK, FPL, ETR, FE, AEP, EIX, AES, PPL, CEG, PGN, XEL, DTE, NRG.

We ran a list of other power generation competitors to TXU (TXU) and this new list has been expanded to show more data (from FEB 23).   We did not differentiate between coal-fired power plants and nuclear-powered plants because of the fact that TXU has both and these are easy to split as is expected in the KKR-led deal.  Even outside of TXU, the power generation sector is doing much better than the market since the TXU announced merger.  So investors are either being defensive in this market OR they are still thinking more merger deals are coming.

Besides the Blackstone, Texas Pacific, Carlyle, KKR, & others, Warren Buffett and Berkshire Hathaway are still deemed as potential bidders among many other firms for other power generation assets.  The KKR-Texas Pacific deal valued the shares at $69.25, but the close Friday was $62.75; shares sit today before the close up 2.8% at $64.56.  Shares closed on Friday, FEB 23 at $59.63 (adjusted for dividend); so shares are up over 7% since then (the S&P is actually Down 3.5% in the same timeframe).  If the KKR & Texas Pacific Capital were bounced out of the deal, it is feasible they would look elsewhere.  Warren Buffett may still be thinking about where he can invest into the sector too.  We gave the following 13 comparables back then, and here is how the list compared:

Stock (Close on FEB 23); Price Now (adjusted for dividends); market capitalization; P/E

Duke Energy (DUK) $19.91; $19.69 (-$0.22); $24.6B mkt Cap; 12.4 P/E.
FPL Group (FPL) $59.23; $59.80 (+$0.57); $24.6B mkt cap; 18.4 P/E.
Entergy (ETR) $100.95; $100.65 (-$0.30) $19.8B mkt cap; 18.6 P/E.
Firstenergy (FE) $63.51; $63.53 (+$0.02); $20.1B mkt cap; 16.6 P/E.
Amer Elec Pwr (AEP) $45.75; $46.40 (+$0.65); $18.2B mkt cap; 18.2 P/E.
Edison Int’l (EIX) $46.97; $48.97 (+$2.00); $15.8B mkt cap; 13.5 P/E.
AES Corp (AES) $22.28; $21.01 (-$1.27); $13.6B mkt cap; P/E n/r.
PPL Corp. (PPL) $37.26; $38.55 (+1.29); $14.5B mkt cap; 16.8 P/E.
Constellation (CEG) $75.66; $83.75 (+$8.09); $15.1B mkt cap; 16.2 P/E.
Progress Energy (PGN) $50.09; $49.90 (-$0.19); $12.7B mkt cap; 21.6 P/E.
Xcel Energy (XEL) $24.18; $23.69 (-$0.49); $9.6B mkt cap; 17,3 P/E.
DTE Energy (DTE) $47.20; $46.82 (-$0.38); $8.2B mkt cap; 19 P/E.
NRG Energy (NRG) $63.52; $70.67 (+$7.15); $8.5B mkt cap; 17.1 P/E.

So as you can tell many of these are up and the ones that are down are not trading down anywhere close to the 3.5% drop in the S&P (except AES).  A merger speculator would say the sector is still in play here because of the price action compared to the markets.  Also we listed the P/E ratios here, but keep in mind that many of these are different and aren’t apples to apples. 

Jon C. Ogg
March 19, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.