Transcript Northern Trust

2009
FALL FOCUS
INVESTMENT CONFERENCE
Utilities Sector
Regulated and Integrated Electric Utilities
Gas Pipelines and Gas Utilities
William Hurley, CFA
Senior Equity Analyst
© 2009 Northern Trust Corporation
northerntrust.com
Utilities Sector Performance
Utilities have outperformed the broad index on a 3-year basis.
Indexed Total Return
(1 Year and 3 Years)
S&P 500 Utilities
S&P 500
S&P 500 Utilities
110%
S&P 500
140%
130%
100%
120%
90%
110%
100%
80%
90%
70%
80%
70%
60%
60%
2
2009 Fall FOCUS Investment Conference
9/29/09
6/29/09
3/29/09
12/29/08
9/29/08
6/29/08
3/29/08
12/29/07
9/29/07
6/29/07
3/29/07
12/29/06
50%
9/29/06
9/30/09
8/30/09
7/30/09
6/30/09
5/30/09
4/30/09
3/30/09
2/28/09
1/30/09
12/30/08
11/30/08
10/30/08
9/30/08
50%
Regulated Utilities Performance
The regulated utilities outperform in the first half of a recession.
Indexed Total Return
(1 Year and 3 Years)
2009 Fall FOCUS Investment Conference
7/31/09
6/30/09
5/31/09
4/30/09
3/31/09
2/28/09
1/31/09
12/31/08
50%
11/30/08
50%
10/31/08
60%
9/30/08
60%
8/31/08
70%
7/31/08
70%
6/30/08
80%
5/31/08
80%
4/30/08
90%
3/31/08
90%
2/29/08
100%
1/31/08
100%
12/31/07
110%
3
Regulated Utes
S&P 500
Regulated Utes
10/31/08
S&P 500
110%
Regulated Utilities Dividend Yield
The regulated utilities historically have yielded 80 basis points less than the
10-year Treasury. Right now, at 5.9%, they yield 260 basis points more.
10-Year Treasury Yield Versus Regulated Average Dividend Yield
US 10Y
Ave. Reg. Ute
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
4
2009 Fall FOCUS Investment Conference
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
0%
Integrated Utilities and Natural Gas Prices
The integrated utilities have been roughly correlated
with natural gas prices.
Indexed Total Return
(3 Years)
Natural Gas (Rt. Axis)
S&P 500
Integrated Utes
160%
300%
140%
250%
120%
200%
100%
80%
150%
60%
100%
40%
50%
20%
0%
Oct-06
Nov-06
Dec-06
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Sep-07
Oct-07
Nov-07
Jan-08
Feb-08
Apr-08
May-08
Jun-08
Aug-08
Sep-08
Oct-08
Dec-08
Jan-09
Mar-09
Apr-09
May-09
Jul-09
Aug-09
Sep-09
0%
5
2009 Fall FOCUS Investment Conference
Utilities Coverage and Themes
Examples of Themes,
Ordered by Exposure or Preference
Coverage

Regulated Electric Utilities
 PG&E
(PCG) – 1/A
 Southern
 Duke

(SO) – 2/A
Regulated Gas / Pipeline
 Entergy
 Exelon
 FPL



(D) – 2/B
Transmission

2009 Fall FOCUS Investment Conference
ETR; FPL; D
Natural Gas Infrastructure
 SE
6
ETR; D; FPL
Carbon Legislation
 EXC;

EXC? (Watch for note soon.)
Natural Gas Prices
 EXC;
(FPL) – 1/A
 Dominion
PCG
 PCG?;
(ETR) – 1/B
(EXC) – 1/A
SO
Renewables
 FPL;
(SE) – 1/B
Integrated Utilities
Dividend Yield
 PCG;
(DUK) – 2/B
 Spectra


2009
FALL FOCUS
INVESTMENT CONFERENCE
Alternative Energy
Solar
William Hurley, CFA
Senior Equity Analyst
© 2009 Northern Trust Corporation
northerntrust.com
Solar and Crude
The solar companies are less correlated with crude, as it should be.
Crude
SPWRA
40%
40%
20%
20%
0%
0%
2009 Fall FOCUS Investment Conference
Sep-09
60%
Aug-09
60%
Jul-09
80%
May-09
80%
Apr-09
100%
Mar-09
100%
Jan-09
120%
Dec-08
120%
Oct-08
8
FSLR
Chinese Solar Versus First Solar
The Chinese companies have run on lower polysilicon prices;
operating leverage.
Index of Chinese Solar Cos.
First Solar
120%
100%
80%
60%
40%
20%
9
2009 Fall FOCUS Investment Conference
10/2/09
9/2/09
8/2/09
7/2/09
6/2/09
5/2/09
4/2/09
3/2/09
2/2/09
1/2/09
12/2/08
11/2/08
10/2/08
0%
2009
FALL FOCUS
INVESTMENT CONFERENCE
Thank you.
William Hurley, CFA
Senior Equity Analyst
© 2009 Northern Trust Corporation
northerntrust.com