William Hurley, CFA Senior Equity Analyst

© 2009 Northern Trust Corporation northerntrust.com

FALL FOCUS

2009

INVESTMENT CONFERENCE

William Hurley, CFASenior Equity Analyst

Utilities SectorRegulated and Integrated Electric UtilitiesGas Pipelines and Gas Utilities

http://www.northerntrust.com/

2 2009 Fall FOCUS Investment Conference

Utilities Sector Performance

Utilities have outperformed the broad index on a 3-year basis.

Indexed Total Return(1 Year and 3 Years)

50%

60%

70%

80%

90%

100%

110%

9/30

/08

10/3

0/08

11/3

0/08

12/3

0/08

1/30

/09

2/28

/09

3/30

/09

4/30

/09

5/30

/09

6/30

/09

7/30

/09

8/30

/09

9/30

/09

S&P 500 Utilities S&P 500

50%

60%

70%

80%

90%

100%

110%

120%

130%

140%

9/29

/06

12/2

9/06

3/29

/07

6/29

/07

9/29

/07

12/2

9/07

3/29

/08

6/29

/08

9/29

/08

12/2

9/08

3/29

/09

6/29

/09

9/29

/09

S&P 500 Utilities S&P 500


Regulated Utilities Performance

The regulated utilities outperform in the first half of a recession.

Indexed Total Return(1 Year and 3 Years)

50%

60%

70%

80%

90%

100%

110%

12/3

1/07

1/31

/08

2/29

/08

3/31

/08

4/30

/08

5/31

/08

6/30

/08

7/31

/08

8/31

/08

9/30

/08

10/3

1/08

S&P 500 Regulated Utes

50%

60%

70%

80%

90%

100%

110%

10/3

1/08

11/3

0/08

12/3

1/08

1/31

/09

2/28

/09

3/31

/09

4/30

/09

5/31

/09

6/30

/09

7/31

/09

S&P 500 Regulated Utes


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

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%19

89

1991

1993

1995

1997

1999

2001

2003

2005

2007

US 10Y Ave. Reg. Ute


Integrated Utilities and Natural Gas Prices

The integrated utilities have been roughly correlated with natural gas prices.

Indexed Total Return(3 Years)

0%

50%

100%

150%

200%

250%

300%

Sep

-09

Aug

-09

Jul-0

9M

ay-0

9A

pr-0

9M

ar-0

9Ja

n-09

Dec

-08

Oct

-08

Sep

-08

Aug

-08

Jun-

08M

ay-0

8A

pr-0

8Fe

b-08

Jan-

08N

ov-0

7O

ct-0

7S

ep-0

7Ju

l-07

Jun-

07M

ay-0

7M

ar-0

7Fe

b-07

Dec

-06

Nov

-06

Oct

-06

0%

20%

40%

60%

80%

100%

120%

140%

160%Natural Gas (Rt. Axis) S&P 500 Integrated Utes


Regulated Electric Utilities PG&E (PCG) – 1/A

Southern (SO) – 2/A Duke (DUK) – 2/B

Regulated Gas / Pipeline Spectra (SE) – 1/B

Integrated Utilities Entergy (ETR) – 1/B Exelon (EXC) – 1/A FPL (FPL) – 1/A Dominion (D) – 2/B

Utilities Coverage and Themes

Coverage Dividend Yield

PCG; SO

Renewables FPL; PCG

Transmission PCG?; EXC? (Watch for note soon.)

Natural Gas Prices EXC; ETR; D; FPL

Carbon Legislation EXC; ETR; FPL; D

Natural Gas Infrastructure SE

Examples of Themes, Ordered by Exposure or Preference


FALL FOCUS

2009



Alternative EnergySolar



Solar and Crude

The solar companies are less correlated with crude, as it should be.

0%

20%

40%

60%

80%

100%

120%

Sep

-09

Aug

-09

Jul-0

9

May

-09

Apr

-09

Mar

-09

Jan-

09

Dec

-08

Oct

-08

0%

20%

40%

60%

80%

100%

120%Crude FSLR SPWRA


Chinese Solar Versus First Solar

The Chinese companies have run on lower polysilicon prices; operating leverage.

0%

20%

40%

60%

80%

100%

120%10

/2/0

8

11/2

/08

12/2

/08

1/2/

09

2/2/

09

3/2/

09

4/2/

09

5/2/

09

6/2/

09

7/2/

09

8/2/

09

9/2/

09

10/2

/09

Index of Chinese Solar Cos. First Solar


FALL FOCUS

2009



Thank you.


William Hurley, CFA Senior Equity Analyst

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