North America Power & Utilities "PJM's Rulemaking Combination Looks Cons..."

研报英文原文证据摘录

North America Power & Utilities "PJM's Rulemaking Combination Looks Cons..."

Valuation Method and Risk Statement

North America Utilities: Our valuation methodology for the group is price-to-earnings

based.The adjustments applied fall into 7 categories. These are as follows: 1) Group Valuation

Bias:Flowing from our valuation work comparing Baa corporate yields to group dividend

yields and RU price-to-earnings ratios to those for the S&P 500, we incorporate a positive or

negative adjustment to our group multiple representing the gap we calculate to the nearest

5%; 2) Growth Adjustment: We adjust our valuations based on the growth quartile each

utility occupies. First quartile receives a 4% premium, second quartile a 2% premium, third

quartile a 2% discount and fourth quartile a 4% discount; 3) Regulatory Adjustment: Our

valuation ajustments for regulation are based on our proprietary Regulatory Rankings. First

quartile jurisdictions receive 6%, second quartile 2%, third quartile -2% and fourth quartile

-6%; 4) Clean Energy Transition: A potential 5% premium for a risk-adjusted clean energy

transition growth opportunity; 5) Earnings Consistency Adjustment: We assign premiums/

discounts to reflect our views on track records, management execution and risks to the

business plans; 6) Multi Utility Diversified Valuation: For multi utilities (those with more than

15% of unregulated earnings), we perform a sum-of-the-parts analysis applying business/

region appropriate valuations to those diversified businesses; 7) One-off Adjustments: In

special situations, we value risk on an issue-specific basis. Common areas where we apply

such an adjustment include: large project construction risk, legal risk, and announced M&A

completion risk.