For Immediate Release
Chicago, IL – September 1, 2010 – Zacks.com Analyst Blog features: Deere & Co. (DE), Exelon Corp. (EXC), Grupo Aeroportuario del Pacífico S.A.B. de C.V. (PAC), Aeroportuario del Centro Norte S.A.B. de C.V. (OMAB) and Grupo Aeroportuario del Sureste S.A.B. de C.V. (ASR).
Here are highlights from Tuesday’s Analyst Blog:
Deere to Sell Wind Energy Business
Deere & Co. (DE) announced that it will sell its wind energy business, John Deere Renewables, LLC, to Exelon Corp.'s (EXC) wholly owned subsidiary, Exelon Generation Company. The deal, valued at $900 million, includes a provision for $40 million upon commencement of construction of the advanced development projects.
Pursuant to regulatory approvals, the transaction will close by the end of fiscal 2010 and Deere will record an after-tax charge of approximately $25 million in its fourth quarter results. During its third quarter earnings call, Deere had announced its fourth quarter net income guidance of approximately $375 million. The abovementioned charge was not included in the same.
John Deere Renewables invests in, and provides value-added services for, wind project development. These services include comprehensive project development services, wind turbine supply and operation management as well as long-term debt and equity investment for wind energy projects in the U.S. and Canada.
John Deere Renewables’ portfolio comprises 36 completed projects in eight states with an installed, operating wind capacity of 735 megawatt that is enough to power 160,000 to 220,000 households as well as other projects in the pipeline. The pipeline comprises 1,468 megawatts of new wind projects that are, currently, in various stages of development, including 230 megawatts in advanced stages of development.
In 2005, Deere established its wind energy business unit managed by its Credit segment. Since then, the company has invested over $1 billion in financing, development and ownership of wind energy projects. The company spearheads project development, management and financing of wind energy projects in rural U.S. communities.
The wind business was not in line with Deere’s core set of businesses. As a result, in February 2010, the company had divulged that it was weighing strategic options for its wind energy business, which included a possible sale.
Another Setback for Mexican Airlines
Grupo Mexicana de Aviación, which operates through its three subsidiaries, Compañía Mexicana de Aviación (Mexicana), Aerovías Caribe, S.A. de C.V. (Mexicana Click), and Mexicana Inter, S.A. de C.V. (Mexicana Link) declared the indefinite suspension of its operations since 28 August, 2010.
For fiscal 2009, Grupo Mexicana de Aviación contributed 12.63% of Grupo Aeroportuario del Pacífico S.A.B. de C.V.'s (PAC) total revenue. Grupo Mexicana contributed 12.5% and 10.3% of Aeroportuario del Centro Norte S.A.B. de C.V.'s (OMAB) and Grupo Aeroportuario del Sureste S.A.B. de C.V.'s (ASR) total revenue from January to July 2010, respectively. Thus, this seems to be depressing news for the the three Mexican airline operators.
Mexican airline operators have been facing tough times. Along with the economic recession in 2008, Mexican airlines sector was largely hit by the H1N1 virus, which broke out in Mexico in the first half of 2009.
During the economic downturn, the airline industry worldwide was badly hit due to accelerating fuel prices, close to $150 per barrel. Now that fuel prices have gone down to the mid-70s and markets are gradually picking up, Mexican airlines have encountered new problems with regard to suspension of flights.
This issue is expected to have a negative effect on the top-line results of Mexican airline operators as Grupo Mexicana is one of the major airlines.
However, the worldwide airline industry is expected to show positive results in the coming years. The International Air Transport Association (IATA) expects the airline industry to return profits of $2.5 billion in 2010. Thus, we maintain our Neutral recommendation on all the three Grupo Aeroportuario. ADS, PAC and ASR currently retain their short term “Hold” ratings (Zacks #3 Rank) while OMAB retains its “Sell” rating (Zacks #4 Rank).
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