March 19, 2013 08:00 ET

Utilities Adapt to Changing Market Dynamics

The Provides Stock Research on Vectren Corp. and Pinnacle West Capital Corp.

NEW YORK, NY--(Marketwire - Mar 19, 2013) - The utilities industry has been adapting to changing regulatory landscape. The industry has been under pressure to meet new environmental regulations. Meanwhile, electric demand in the U.S. is expected to slow down. Despite the challenging environment, Vectren Corporation (NYSE: VVC), and Pinnacle West Capital Corporation (NYSE: PNW) last month reported strong financial results for 2012. The utilities industry is under pressure to meet new environmental regulations. As companies make the required changes, they are likely to face increasing financial pressure. Utilities are also seeing a rise in capital spending as they upgrade their existing infrastructure.

Access our free reports on Vectren Corp. and Pinnacle West Capital Corp. Traders can also connect to our Wall Street Trading Floor where our research desk and market pros are standing between 8:50 am to 4:15 pm ET at

While costs are expected to rise for the utilities industry in coming years, electric demand in the U.S. is expected to see a slow down as population growth slows. In addition, consumers and businesses are looking to reduce their energy consumption. This is likely to further weaken demand for electricity. Another major trend to emerge in the utilities industry has been increasing investment in technology. More and more companies in the utilities sector are looking to implement new power generation and distribution technology. Companies are also investing heavily in smart-grid technology, which is likely to be beneficial in the long-term.

Natural gas prices fell to record low levels last year, prompting a number of utilities to switch from coal to natural gas. In fact, at one stage last year, power generation from natural gas nearly equaled that from coal. Although natural gas prices have bounced back from record low levels, they are still quite low. With utilities under increasing pressure to meet environmental regulations, the shift to natural gas for power generation may continue.

Finally, utilities suffered last year due to an unusually warm winter. Companies in the utilities sector will be hoping for a return to usual weather pattern this year. Although 2012 was a challenging year for the utilities industry, Vectren Corporation and Pinnacle West Capital Corporation last month reported strong results for 2012.

Vectren Corporation's utility earnings for 2012 came in at $138 million, or $1.68 per share, compared to $122.9 million, or $1.50 per share reported in 2011. For 2013, the company expects its utility group earnings to be between $1.65 per share and $1.75 per share.

Carl Chapman, Chairman, President and CEO of Vectren Corporation, said that the company's utility group delivered solid results for the full year, while its infrastructure services business exceeded expectations all year.

Conversely, Pinnacle West Capital Corporation last month reported consolidated ongoing earnings of $387.4 million, or $3.50 per share for 2012, compared to $328.1 million, or $2.99 per share reported in 2011.

Don Brandt, Chairman, President and CEO of Pinnacle West Capital Corporation, said that superior operational performance by the company's dedicated employees combined with cost management and economic improvement in the company's market area produced full year financial results at the top of expectations.


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