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  • 02/05/2018
    Fixed Income
    Geoffrey Wan
    The US utilities sector is undergoing a transformation amid a state-wide push towards a low-carbon economy and increasing pressure on big energy companies to “go green”. As the shift to clean power accelerates, Geoff Wan, Credit Analyst at Hermes Investment Management, assesses the investment landscape in the US utilities sector. “Lacklustre demand for power has been driven by, among other things, energy efficiency measures. Today, the adoption of LED lighting is rapidly rising, electrical appliances and equipment performance standards have improved, household thermal insulation is more efficient and conscious efforts have been made to be less wasteful of electricity. On the supply side, excess capacity is to blame. “Meanwhile, lower commodity prices and cheaper renewable energy generation and storage costs are adding to the woes of US independent power producers (IPPs) – that is, utilities operating in the unregulated power sector. These adverse effects have reverberated across a number of key US regional electricity markets. For example, demand in New England’s grid (IS-NE) has fallen by about 0.5% year-on-year for the past three years. Moreover, the challenging operating environment has resulted in a wave of bankruptcies and mergers, with companies scrambling to scale up and cut costs in a bid to survive.
  • 09/01/2018
    Fixed Income
    Geoffrey Wan
    Valuations in the US public hospital sector are looking attractive, and that’s led us to reassess the investment opportunities within the US high-yield healthcare universe. But a highly selective approach is needed. New research by Mitch Reznick, Co-Head of Credit and Geoffrey Wan, Credit Analyst at Hermes Investment Management looks at the factors causing volatility as well as the opportunities in this market. Mitch and Geoffrey, said: “Although the sector is often viewed as defensive and non-cyclical, hospitals in the US are facing a structural, secular shift. US healthcare spend per capita is the third highest in the world, at around 18% of annual GDP. However, by most metrics the quality of healthcare in the US is not viewed as commensurate with this level of spending. As such, scrutiny of insurers and patients’ demands for lower costs have driven a move away from the fee-for-service model that healthcare providers are familiar with to a model that demands value and quality in exchange for payment.”