The cap and trade bill will be huge business for investment banks, leading to a boom in M&A and underwriting activity, says Kyle Stock on the WSJ’s Deal Journal blog.
In particular, U.S. industrial companies will begin to look more attractive to companies in Europe, which has had a carbon market since 2005. While the U.S. power market has long looked good to foreigners, because Americans buy a relatively large amount of electricity per-capita and the regulatory structure here lends itself to rate increases, European companies have shied away from acquisitions because of the carbon question mark. They would likely be bolder if carbon had a price and a fixed supply.
Relatively “clean” utilities such as Xcel Energy, of Minneapolis, would command a premium, as would those that are buying or building wind turbines and solar panels, like New Jersey’s NRG Energy.
Meantime, Hill said a cap-and-trade system would also heat up underwriting activity, as power companies would need to raise cash to bankroll new infrastructure for cutting emissions and to buy companies that create renewable energy. Continue>
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