Please refer to the important disclosures and analyst certification beginning on page 12 of this document, or on our

website www.macquarie.com.au/disclosures.
UNITED STATES



Stocks in our coverage
Regulated electric utilities:
AEP (US$40.96, Neutral, TP: US$40.00)
CMS (US$23.68, Outperform, TP: US$25.50)
CNP (US$20.57, Neutral, TP: US$21.00)
D (US$53.83, Outperform, TP: US$58.00)
DTE (US$59.24, Outperform, TP: US$61.00)
DUK (US$66.23, Outperform, TP: US$70.00)
EIX (US$45.65, Outperform, TP: US$49.00)
HE (US$28.69, Neutral, TP: US$25.50)
LNT (US$45.56, Outperform, TP: US$48.00)
NU (US$38.69, Neutral, TP: US$37.00)
PCG (US$45.01, Neutral, TP: US$43.00)
POR (US$26.88, Neutral, TP: US$26.50)
SCG (US$48.15, Neutral, TP: US$47.00)
SO (US$46.54, Neutral, TP: US$46.00)
TE (US$18.17, Neutral, TP: US$18.00)
UIL (US$36.48, Outperform, TP: US$39.00)
XEL (US$28.59, Outperform, TP: US$28.00)
Diversified electric utilities:
AES (US$12.84, Neutral, TP: US$14.00)
ETR (US$67.88, Neutral, TP: US$68.00)
EXC (US$37.35, Neutral, TP: US$40.00)
FE (US$49.18, Outperform, TP: US$50.00)
NEE (US$68.30, Outperform, TP: US$69.00)
PEG (US$32.19, Neutral, TP: US$31.00)
PPL (US$27.91, Neutral, TP: US$28.00)
Independent power producers:
CPN (US$16.74, Outperform, TP: US$21.00)
GEN (US$1.58, Neutral, TP: US$2.75)
NRG (US$17.14, Outperform, TP: US$19.00)
Water utilities:
AWK (US$34.71, Outperform, TP: US$38.00)
WTR (US$25.87, Neutral, TP: US$23.00)
Alternative energy and smart grid:
BWEN (US$0.33, Neutral, TP: US$0.90)
ELT (US$20.40, Neutral, TP: US$20.50)
ENOC (US$6.91, Neutral, TP: US$9.00)
ERII (US$2.36, Neutral, TP: US$2.75)
ITRI (US$42.50, Neutral, TP: US$45.00)
ORA (US$20.87, Neutral, TP: US$20.00)
Note: Share prices as of close on 6 J uly 2012.
Source: FactSet, Macquarie Capital (USA), J uly 2012
Anal yst(s)
Angie Storozynski
+1 212 231 2569 angie.storozynski@macquarie.com
Andrew Weisel, CFA
+1 212 231 1159 andrew.weisel@macquarie.com
Cleo Zagrean, CFA
+1 212 231 1749 cleo.zagrean@macquarie.com

9 J uly 2012
Macquarie Capital (USA) Inc.
US utilities
Weekly snapshot
Top news
We initiated coverage of CMS Energy with an Outperform rating and a
US$25.50 TP.
We published an update on SMID cap regulated utilities highlighting weak
load trends in 2Q12. We raised our TP for DTE to US$61 from US$59.
We downgraded ELT to Neutral from Outperform and raised our TP to
US$20.50 from US$17.50 given the aqusition offer from Melrose PLC.
Weekl y performance
The S&P 500 ended the week down 0.5%. The Macquarie Water, Regulated,
and Diversified Indices outperformed, up 1.8%, 0.2%, and down 0.3%,
respectively. The IPP Index underperformed, down 2.5%. Treasury yields fell
10bps to 1.56%.
Electricity demand rose 4.0% YoY in the week ended J une 30 and is down
2.4% YTD.
Performance for the week ended 6 Jul y 2012

Source: FactSet, SNL, Macquarie Capital (USA), J uly 2012
* See page 2 for components of Macquarie Indices.
Lighter side of the news
Too much too soon can be a letdown a computer glitch apparently caused the San Diego
Fourth of July firweorks to light up all at the same time, such that viewers had to go home after
only 15 seconds of enchantment.Garden State Fireworks of New Jersey, who set up the show,
will offer a makeup at some point. Until then, one could just play any of a number of YouTube
videos on repeat to put together the 17 advertised minutes of the show.
-20% -15% -10% -5% 0% 5% 10%
Electricity demand
S&P 500
Macq Water Index
Macq IPP Index
Macq Div Index
Macq Reg Index
1 Week YTD
123


M
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Fig 1 Stocks under coverage Comp sheet

Price
12-mo. target
price

EV/EBITDA (2013E) PER (2013E) 52-week Di vi dend

Ticker Rati ng (7/6/12, US$) (US$) TSR Macquari e Consensus 10-Year Avg Macquari e Consensus 10-Year Avg high/low (US$) yi el d Anal yst
Regulated electric utilities
Alliant Energy LNT Outperform 45.56 48.00 9.3% 8.3 8.0 6.5 14.4 14.6 12.7 33.91 - 46.27 4.0% AW
American Electric Power AEP Neutral 40.96 40.00 2.3% 9.1 8.1 7.0 13.6 13.1 12.2 33.09 - 41.98 4.6% AS
CenterPoint Energy CNP Neutral 20.57 21.00 6.0% 7.3 8.1 7.7 16.3 16.7 13.6 17.11 - 21.47 3.9% AW
CMS Energy CMS Outperform 23.68 25.50 11.7% 8.4 7.8 7.0 14.6 14.5 11.4 16.96 - 23.98 4.1% AW
Dominion Resources D Outperform 53.83 58.00 11.5% 9.5 9.6 8.0 15.8 15.7 12.8 44.5 - 54.69 3.8% AS
DTE Energy DTE Outperform 59.24 61.00 7.0% 7.1 6.9 7.5 14.8 14.9 12.3 43.22 - 60.25 4.0% AW
Duke Energy DUK Outperform 66.23 70.00 10.3% 5.7 7.9 7.5 14.8 14.8 18.9 50.61 - 71.13 4.6% AS
Edison International EIX Outperform 45.65 49.00 10.2% 6.8 6.9 5.5 18.5 17.5 12.5 32.64 - 46.81 2.9% AS
Hawaiian Electric Industries HE Neutral 28.69 25.50 -6.8% 8.5 7.8 11.4 16.7 16.3 14.1 20.59 - 28.93 4.3% AW
Northeast Utilities NU Neutral 38.69 37.00 -1.2% 9.3 9.0 7.0 15.2 15.1 14.2 30.02 - 39.3 3.2% AW
Pacific Gas &Electric PCG Neutral 45.01 43.00 -0.3% 9.9 6.7 5.8 15.6 14.5 12.7 36.84 - 45.81 4.2% AS
Portland General Electric POR Neutral 26.88 26.50 2.6% 6.8 6.9 5.8 14.6 14.0 12.4 21.29 - 27.07 4.0% AW
SCANA Corp. SCG Neutral 48.15 47.00 1.7% 10.8 9.0 7.9 14.8 14.6 12.8 34.64 - 48.51 4.1% AW
Southern Company SO Neutral 46.54 46.00 3.0% 9.2 9.2 8.6 16.7 16.5 14.8 35.73 - 48.45 4.2% AS
TECO Energy TE Neutral 18.17 18.00 3.9% 6.6 7.1 8.1 13.4 13.1 12.7 15.82 - 19.41 4.8% AW
UIL Holdings UIL Outperform 36.48 39.00 11.6% 9.6 8.3 7.4 15.5 15.8 15.7 29. - 36.75 4.7% AW
Xcel Energy XEL Outperform 28.59 28.00 1.7% 8.7 8.0 6.7 15.5 15.2 12.9 21.2 - 29.12 3.7% AS

Diversified electric utilities
AES Corp AES Neutral 12.84 14.00 9.0% 4.0 4.3 5.9 9.8 9.6 12.0 9. - 14.01 0.0% AS
Entergy ETR Neutral 67.88 68.00 5.2% 8.1 7.4 7.2 13.0 12.8 12.7 57.6 - 74. 5.0% AS
Exelon EXC Neutral 37.35 40.00 12.7% 5.0 6.0 7.4 13.2 13.5 13.1 36.27 - 45.45 5.6% AS
FirstEnergy FE Outperform 49.18 50.00 6.1% 7.4 8.0 7.2 15.0 15.2 12.6 38.77 - 49.93 4.5% AS
NextEra Energy NEE Outperform 68.30 69.00 4.5% 8.3 8.9 7.7 14.1 13.8 13.1 49. - 69.26 3.4% AS
Public Service Enterprise PEG Neutral 32.19 31.00 0.7% 6.6 6.7 7.5 13.8 13.4 12.3 27.97 - 35.48 4.4% AS
PPL Corp PPL Neutral 27.91 28.00 5.5% 8.1 8.0 7.3 11.8 11.7 12.6 25. - 30.27 5.2% AS

Independent power producers
Calpine CPN Outperform 16.74 21.00 25.4% 8.6 8.8 8.7 18.7 N/M 45.8 12.7 - 19.03 N/M AS
GenOn Energy GEN Neutral 1.58 2.75 74.1% 5.4 5.5 6.6 N/M N/M 14.0 1.24 - 4.14 N/M AS
NRG Energy NRG Outperform 17.14 19.00 10.9% 7.2 7.1 5.4 -259.1 62.9 138.0 14.29 - 25.66 N/M AS

Water utilities
American Water Works AWK Outperform 34.71 38.00 12.3% 9.4 9.1 8.5 16.4 16.6 14.9 25.39 - 35. 2.8% AS
Aqua America WTR Neutral 25.87 23.00 -8.4% 10.5 10.9 10.7 22.6 22.1 22.9 19.28 - 25.93 2.7% AS

Alternative energy and smart grid
Broadwind Energy BWEN Neutral 0.33 0.90 172.7% 2.1 2.0 5.7 -20.0 -11.4 -20.4 .25 - 1.53 N/M AS
Elster Group ELT Neutral 20.40 20.50 0.5% 8.9 8.7 7.1 14.6 14.6 11.6 11.52 - 20.4 N/M AW
EnerNOC ENOC Neutral 6.91 9.00 30.2% 2.3 2.4 N/M -935.1 -1032.6 26.8 5.41 - 17.72 N/M AW
Energy Recovery ERII Neutral 2.36 2.75 16.5% 5.9 -204.8 8.2 30.6 N/M -27.9 1.95 - 3.5 N/M AS
Itron ITRI Neutral 42.50 45.00 5.9% 6.4 7.0 9.2 10.3 10.5 17.8 26.9 - 50.35 N/M AW
Ormat Technologies ORA Neutral 20.87 20.00 -3.4% 8.4 8.4 10.2 41.8 26.0 25.6 14.1 - 22.91 0.8% AS
Source: FactSet, Macquarie Capital (USA), J uly 2012
Fig 2 Utilities 12-month performance

Source: FactSet, Macquarie Capital (USA), J uly 2012

0.50
0.70
0.90
1.10
1.30
J ul-11 Sep-11 Nov-11 J an-12 Mar-12 May-12 J ul-12
S&P 500 Macq Reg Index Macq Div Index Macq IPP Index Macq Water Index
124
Macquarie (USA) Research US utilities
9 J uly 2012 3
The week in review: 2 6 J uly 2012
CMS Energy Corp. (Initiating coverage with Outperform) - A stock that
lets you sleep at night
We believe that CMSs defensive, above-average rate base and earnings growth should bode
well in this market, and believe that the stock should outperform regulated utility peers. In our
view the bull case on CMS is largely focused on the companys exemplary track record of
delivering consistent earnings growth with limited risk. Despite a historical PE discount vs. peers,
we believe CMS should trade at least at parity given the strong visibility into future earnings,
which should grow at an above-average pace. Of course, this is extremely dependent on a
supportive regulatory environment and load growth, particularly with the loss of decoupling.
Though risks have picked up, we remain comfortable with Michigans utility regulation.
Our 12/13/14/15 EPS estimates are US$1.53/1.62/1.73/1.82.
Catalysts include ongoing economic recovery in MI, earnings continuing to match
guidance/expectations, naming of a new Commissioner and regular rate case filings.
Risks include flat or declining electric/gas delivery volumes, changes to the 2008 legislation,
lower future allowed ROEs, an inability to earn the allowed ROEs, and general market risk
appetite/the level of interest rates.
For more details, please see our report, A stock that lets you sleep at night (9 J uly).
US SMID cap regulated utilities - Weak 2Q load data keep us defensive
Macquaries data show that weather-adjusted load growth, a coincident economic indicator,
contracted by -0.5% in 2Q, or -0.7% excluding TX. Though data are lumpy, J une was the worst
month of 1H12 (-1.1%). We maintain our defensive stance, and therefore remain bullish on
regulated utilities. However we admit that this is a relative call as we struggle to find meaningful
upside in absolute terms.
Our top picks are Michigan-based CMS Energy and DTE Energy. We initiate coverage of CMS
this morning (please see our report, A stock that lets you sleep at night) with an Outperform rating
and US$25.50 TP based on a 14.6x 2014E PE multiple, matching our sector anchor multiple. We
believe that CMSs defensive, above-average rate base and earnings growth should bode well in
this market, and believe that the current/historical PE discount is unjustified. For DTE, we
increase our TP to US$61 (from US$59) as we remove our PE discount and also now assign
14.6x.
For more details, please see our flyer, US SMID cap regulated utilities Weak 2Q load data keep
us defensive (9 J uly)
Elster (Downgrade to Neutral) - Kiss from a (Mel)rose; cutting to Neutral
ELT announced that it has entered into an agreement to be acquired by Melrose PLC for
US$20.50/sh.
We downgraded ELT to Neutral as we believe shareholders should accept the pending
acquisition and we do not see upside beyond the US$20.50/sh offer. We increased our TP to
US$20.50 (from US$17.50), matching the acquisition offer.
For more details, please see our flyer, Kiss from a (Mel)rose; cutting to Neutral (2 J uly).
The AES Corp. (Neutral) - Eletropaulo's tariff reduction disappoints
On J uly 2 the Agencia Nacional of Energia Electrica (Aneel), the electric power market regulator
in Brazil, reduced Eletropaulo's electric rates by 9.33% compared to an 8.81% reduction
proposed by a regulatory audit in April. The tariff will be reviewed again in four years. AES owns a
16% stake in Eletropaulo, Brazil's largest electric utility.
Companies mentioned:
CMS
AES
CMS
SMID regulated
utilities
ELT
125
Macquarie (USA) Research US utilities
9 J uly 2012 4
While many expected the final tariff reset for Eletropaulo to surprise to the upside given a harsh
proposed rate reduction, last night's announcement was surprisingly even tougher than what was
proposed. While the rate reduction was not much bigger than originally proposed (9.33% vs.
8.81%) we see US$0.01-0.02ps downside to our AES EPS estimates for 2012 and beyond
though we expect Eletropaulo to attempt to offset the impact through cost cutting. We reiterate
our Neutral rating while we await a resolution in AES's pending rate case in OH and
announcements of non-core asset divestitures.
For more details, please see our flashnote, Eletropaulo's tariff reduction disappoints (3 J uly).
American Electric Power (AEP US) (Neutral) - Ohio capacity decision
leaves plenty of uncertainty
The Public Utilities Commission of Ohio (PUCO) issued a (partial) ruling of AEP's capacity pricing
case in the state.
PUCO's decision in AEP's capacity case in OH leaves a lot of unanswered questions. While the
capacity rate (US$188.88/MW-day) is above consensus expectations, most of the capacity
charges will be deferred over an undetermined period of time, during which the company will
likely face accelerated customer switching. Additionally, it is uncertain how the cost deferral ties
into AEP's request for transition charges under its pending electric security plan (ESP). We won't
know the impact of the OH rate proceedings on AEP's profitability until early August. In the
meantime we reiterate Neutral.
For more details, please see our flashnote, Ohio capacity decision leaves plenty of uncertainty (2
J uly).
Duke Energy (Neutral) Awaiting NC hearing
We are surprised by the sudden change in DUK's CEO position - Bill J ohnson has resigned and
J im Rogers has been reinstated as the CEO of the company essentially as soon as the merger
closed - and look forward to Tuesday's regulatory hearing in North Carolina to find out more
details about this decision by the new board of enlarged Duke Energy.
While we worry about potential regulatory backlash against DUK, we are much more concerned
that the CEO decision may have been driven by some negative updates from Progress,
potentially surrounding its Crystal River 3 nuclear plant. Based on media reports DUK's Board
received a report on the troubled nuclear plant just days before the closing of the transaction and
the CEO change. We recognize, however, that DUK has reiterated its long-term 4-6% EPS
growth target.
Our new EPS estimates and TP for DUK account for the completed Progress merger and the 1-
to-3 stock split. Our '12/'13/'14/'15 EPS estimates are US$4.28/4.47/4.74/4.98 and our TP is
US$70 (vs. US$23.50 previously). We reiterate our Outperform rating as we await tomorrow's
hearing in NC.



DUK
AEP
126
Macquarie (USA) Research US utilities
9 J uly 2012 5
Fig 3 Weekly performance regulated electric utilities

Fig 4 YTD performance regulated electric utiliti es



Source: FactSet, Macquarie Capital (USA), J uly 2012 Source: FactSet, Macquarie Capital (USA), J uly 2012

Fig 5 Weekly performance diversified utiliti es

Fig 6 YTD performance diversified utilities



Source: FactSet, Macquarie Capital (USA), J uly 2012 Source: FactSet, Macquarie Capital (USA), J uly 2012

Fig 7 Weekly performance IPPs

Fig 8 YTD performance IPPs



Source: FactSet, Macquarie Capital (USA), J uly 2012 Source: FactSet, Macquarie Capital (USA), J uly 2012


Fig 9 Weekly performance water utiliti es

Fig 10 YTD performance water utilities



Source: FactSet, Macquarie Capital (USA), J uly 2012 Source: FactSet, Macquarie Capital (USA), J uly 2012

DUK
EIX
OGE
POM
PCG
S&P 500
CNP
D
NU
DTE
ED
LNT
SO
HE
TE
XEL
SCG
PNW
WEC
EE
Macq Reg Index
POR
PGN
PNM UIL
NI
NVE
-5% -4% -3% -2% -1% 0% 1% 2% 3%
OGE
TE
POM
EE
AEP
ED
DUK
SO
D
CNP
UIL
LNT
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SCG
NU
NVE
S&P 500
PNW
HE
PGN
DTE
PNM
Macq Reg Index
PCG
NI
POR
EIX
-15% -10% -5% 0% 5% 10% 15%
PEG
NEE
EXC
SRE
FE
ETR
AES
S&P 500
Macq Div Index
PPL
-1% -1% -1% -1% 0% 0% 0% 0% 0% 1%
ETR
PPL
PEG
Macq Div Index
S&P 500
AES
FE
NEE
SRE
EXC
-20% -10% 0% 10% 20% 30%
GEN
Macq IPP Index
ORA
NRG
S&P 500
CPN
-10% -8% -6% -4% -2% 0% 2%
GEN
Macq IPP Index
NRG
CPN
S&P 500
ORA
-50% -40% -30% -20% -10% 0% 10% 20%
YORW
CWT
Macq Wtr Index
SJ W
CTWS
WTR
S&P 500
AWK
ARTNA
AWR
MSEX
CWCO
-1% 0% 1% 2% 3% 4% 5%
MSEX
YORW
CWT
SJ W
S&P 500
AWK
AWR
CWCO
Macq Wtr Index
CTWS
WTR
ARTNA
0% 5% 10% 15% 20%
127
Macquarie (USA) Research US utilities
9 J uly 2012 6
Fig 11 Oil and gas futures (Prompt) (US$) Fig 12 Coal forward prices (Prompt) (US$)



Source: SNL, FactSet, Macquarie Capital (USA), J uly 2012 Source: SNL, Macquarie Capital (USA), J uly 2012

Fig 13 Macquarie NYMEX natural gas forward curve
Source: Macquarie Capital (USA), May 2012

3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
2012 2013 2014 2015 2016 2017 2018
US$/MMBtu
Macquarie forecast 8-J ul-11 9-J ul-12
128
Macquarie (USA) Research US utilities
9 J uly 2012 7
2013 Implied ATC heat rates by region (Btu/kWh)
Fig 14 ERCOT

Fig 15 PJM-West



Source: Platts, Macquarie Capital (USA), J uly 2012 Source: Platts, Macquarie Capital (USA), J uly 2012

Fig 16 NI Hub

Fig 17 NEPOOL



Source: Platts, Macquarie Capital (USA), J uly 2012 Source: Platts, Macquarie Capital (USA), J uly 2012
8,000
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129
Macquarie (USA) Research US utilities
9 J uly 2012 8
Fig 18 EEI weekly electric output total US and regions (GWh)
Source: EEI, Macquarie Capital (USA), J uly 2012
Total US Southeast
New England South Central
Mid-Atlantic Rocky Mountain
Central Industrial Pacific Northwest
West Central Pacific Southwest
60,000
65,000
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JJJFF
MMAAMM
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2009 2010 2011 2012
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2009 2010 2011 2012
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2009 2010 2011 2012
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2009 2010 2011 2012
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JJFF
MMAAMMM
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2009 2010 2011 2012
2,500
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2009 2010 2011 2012
4,500
5,000
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7,500
JJFF
MMAAMMM
JJJJAASSOOONNDD
2009 2010 2011 2012
130
Macquarie (USA) Research US utilities
9 J uly 2012 9
Macquaries utility coverage universe
AWK: We think AWK should grow its earnings at 89% pa vs. peers at 56% and yet AWK
trades at a 19% discount to the second-largest water utility (WTR) based on our 14 EPS
estimates. AWKs management continues to bridge the gap between allowed and realized ROE
through rate case filing and cost efficiencies. That together with stable capex should continue to
boost AWKs earnings. AWK is our top pick for regulated electric and water utilities.
D: We remain bullish on D as we expect above-average earnings growth driven by utility and
infrastructure capex, partly offset by weak forward power prices. Though D trades at a modest
P/E premium vs. high-quality large-cap regulated peers, we believe this is justified by D's
regulatory set-up, attractive regulated infrastructure prospects, growing dividends and
management execution.
CPN: We are impressed with the management teams ability to provide a clear growth path,
consisting of long-term power contracts and expansion/upgrades of existing assets. As the
economy recovers and natural gas prices remain low, we believe Calpine is best positioned
among merchant power producers to benefit from both higher volumes and improving spark
spreads.
NRG: NRGs peaking capacity should benefit from tightness in ERCOT as retail businesses
continue to deliver strong and consistent performance. We find the valuation attractive given
Texas-sized upside potential relative to the current forward curves.
FE: Though FEs earnings are pressured by falling dark spreads, rising capacity payments and
competitive retail earnings should largely protect FEs earnings. FE remains our top pick among
diversified electric utilities.
NEE: We like NEEs risk/reward as we see above-average EPS growth and limited downside risk
from falling natural gas prices. NEEs utility with aggressive regulated capex is back to being a
growth engine for the company and FL regulatory environment is improving. While slower-than-
expected growth in the merchant wind business in J uly causes negative headline risk, earnings
are largely protected by hedges and long-term contracts.
DUK: DUKs visible 46% EPS growth, healthy dividend yield and defensive characteristics are
tough to resist, in our view, when faced with macro uncertainties and a paltry 10-year T yield.
Although we remain underwhelmed by DUKs pending merger with PGN, the merger does not
weigh on our stand-alone estimates through 15 and the stock trades at a discount to peers.
LNT: After average growth in 11/12, we believe earnings should accelerate sharply. From 12
15, we project the fastest EPS growth (7.5%) of all SMID cap-regulated utilities, driven by
environmental capex and capacity additions. Additional upside could come from the deployment
of 100MW in merchant wind farms.
UIL: Were attracted to UILs unique combination of above-average, visible earnings growth and a
dividend yield thats c100bps above the SMID cap-regulated utility average. In addition to
US$2.9bn of utility capex through 2021, growth could be further boosted by additional customer
conversions from oil heating to natural gas or upside to transmission capex.
EIX: We believe Southern California Edison is one of the most attractive utilities in the country,
yet EIX is trading at less than the fair value of SCE. We cannot assign a negative valuation to
Edison Mission Energy, due to a lack of debt recourse to the parent company and a potential
salvage value of wind farms. On this basis, we see EIX as undervalued. We also believe EIX is
inexpensive relative to peers based on current and historical relative PE valuations.
CMS: We believe CMS will grow its rate base and EPS by 6-6.5% per annum, largely driven by
state-mandated capex including environmental controls and renewables. Visibility remains
extremely high despite the loss of decoupling thanks to the favorable Michigan regulator setup
and managements impressive track record of managing costs to consistently report earnings
slightly above guidance and consensus.

Outperform

Outperform
Outperform
Outperform
Outperform
Outperform
Neutral Outperform

Outperform
Outperform
Outperform
Neutral Outperform
Neutral Outperform
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Macquarie (USA) Research US utilities
9 J uly 2012 10
DTE: We expect DTE to achieve ~5.5% EPS growth, with limited risk, in our view, thanks to
diversified earnings drivers and a constructive Michigan regulatory setup (including gas
decoupling). Spending is driven primarily by state mandates, most notably around environmental
controls and renewables. We see upside to earnings from non-utility businesses where our
assumptions are very conservative.
XEL: We like XELs clean regulated utility story with visible and above-average EPS growth,
especially as it trades at a discount to its large-cap peers. XELs new CEO and CFO seem
focused on closing the regulatory gap between allowed and realized ROE through multi-year rate
plans as the company executes on a solid capital investment pipeline.
AEP: We believe that AEPs complex business structure and the high exposure of earnings to
OH and industrial customers justify a PE discount to large-cap regulated utility peers. We remain
on the sidelines given continuing uncertainty in OH, flattish 2012 earnings significantly supported
by cost cutting and limited prospects for dividend growth.
AES: AES large geographical spread (even following asset divestitures) along with concerns of
slowing growth in key markets such as Brazil, and its (future) low dividend yield warrant, in our
opinion, some PE discount vs. US diversified utilities. Therefore, we prefer to stick to the sidelines
(at least) through summer as we monitor global growth and investors beta appetite.
BWEN: We have moved to the sidelines as a weakening economy could further delay recovery in
the companys core wind business. The US wind power market continues to struggle due to low
power prices, competition from Asian suppliers for gearboxes and from OEMs for maintenance
contracts. Furthermore, the companys diversification away from wind has led to the need for
incremental capital.
CNP: Though were drawn to the above-average earnings growth of CNP, we remain cautious
about the deployment of cash, possibly including M&A. We expect that the benefits from investing
the cash in J uly will not materialize for a couple of years.
ENOC: We see EnerNOC as a proven leader in the demand response market, with the largest
managed portfolio and a best-in-class reputation for executing on demand response events.
However, were on the sidelines given downside risk to consensus estimates through 2014.
ELT: We see Elster as the most attractive publicly-traded smart-metering company, though we
believe that with shares trading close to the US$20.50 acquisition offer from Melrose, upside is
very limited.
ERII: We are less upbeat about an ongoing recovery in construction capex in the global water
desalination market as political unrest continues in the Middle East.
ETR: We remain on the sidelines and reiterate our Neutral rating. Although nuclear earnings are
largely hedged and ETRs utilities in the Southeast offer strong growth prospects, we continue to
see headline risk related to relicensing of ETRs nuclear plants in the Northeast.
EXC: EXCs merger with CEG provides crucial synergies and power hedges partly shield
generation earnings. EXCs pro forma earnings in 20122014 look flattish at best, but
management has reiterated a strong commitment to dividends. We hope for upside to forward
power and capacity prices but remain on the sidelines.
GEN: Falling natural gas prices and weak power demand have sharply compressed current and
forward dark spreads. However, vintage power hedges, coal plant retirements and (hopefully) rising
PJ M capacity prices coupled with attractive valuation should boost the appeal of GEN to invest.
HE: We see the stock as fully valued and await further evidence of sustained improvements before
assigning additional value. While we acknowledge the appeal of above-average growth and
dividend yield, we are concerned about regulatory risk and low interest rates hurting bank earnings.
ITRI: We see Itron as fairly valued, essentially trading in line with peers on 12. With low 11
guidance and consensus recognizing a lack of growth in 12, we see few additional negative
catalysts. Still, we remain on the sidelines given flattish near-term earnings and ongoing concerns
over Itrons competitive position.
Neutral
Neutral
Outperform Neutral Neutral
Neutral
Neutral Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral

Neutral Outperform
Outperform
Neutral Neutral
Neutral
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Macquarie (USA) Research US utilities
9 J uly 2012 11

NU: We are concerned that NU in J uly faces risks related to regulatory relationships in CT, potential
delays in transmission projects and shrinking NE load growth.
ORA: We believe capex execution will continue to be the key for the company, as aggressive
capex plans need to be met in order to satiate investor appetite. We continue to point to a past
history of capex execution and believe caution is warranted.
PEG: Though PEG continues to trade at a discount to its diversified peers, a continued risk of
subsidized power plants in NJ coupled with customer switching and weakened generation
margins make us stay on the sidelines.
PCG: We believe that regulatory risks outweigh the upside we see for the stock over the next 12
months. We see downside risk to future consensus earnings estimates and believe that the
modest PE discount the stock currently trades at is justified given the regulatory overhangs and
rising equity needs.
POR: Following an unfavorable ruling from the PUC to combine PORs capacity and baseload
RFPs into one combined request, we expect POR to see below-average long-term earnings growth.
Not only does this ruling delay capex, but POR will have less of an advantage over rival bidders.
PPL: We are cautious on PPL's earnings growth as it depends on recent acquisitions of regulated
utilities in jurisdictions where we see downside risk mainly in the UK, given high ROEs and the
recent trend to balance European budgets by taxing utilities. We are also concerned about falling
natural gas and thus power prices, historically mismanaged (merchant) earnings and equity
expectations.
SCG: We continue to expect below-average load growth in SCGs service territories. With limited
load growth in the Carolinas, the growth story of SCANA is driven solely by its nuclear capex.
SO: We have moved to the sidelines given the rich valuation of SO. The company remains the
gold standard among electric utilities. The company continues to excel at managing its
operations, client bills, regulatory relationships and market expectations. Those attributes are,
however, already reflected in its premium PE vs. peers.
TE: We remain cautious on fundamentals, based on a lack of potential positive catalysts, utility
growth that is sub-par and wholly reliant on economic recovery in FL, and continuously falling
coal earnings expectations.
WTR: WTR remains the most efficient and best-run water utility in the US, in our view. Capex
spending, successful rate cases, tuck-in acquisitions and continued cost efficiencies continue to
deliver strong earnings. The strong operational performance of WTR seems already priced in and
therefore we reiterate Neutral.

Neutral
Neutral
Neutral
Neutral Neutral
Neutral Neutral
Outperform

Neutral
Neutral Neutral
Neutral
Neutral
Outperform

Outperform Neutral
Neutral
Neutral
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Macquarie (USA) Research US utilities
9 J uly 2012 12

Fig 19 Required disclosures Valuation and risks
AEP Our US$40 TP is based on our '14 PE valuation. Risks include the outcome of the pending ESP proceeding in OH, customer switching in the state,
forward dark spreads in the Midwest, future PJ M capacity prices, the pace of economic growth and the level of market interest rates.
AES Our 12-month target price of US$14 is based on 10x our '14 EPS and our sum-of-the-parts valuation. Risks include country/political risks due to
geographical spread, economic growth, especially in Brazil and the US, disposals of non-core assets, forex, and taxation of foreign dividends.
AWK Our US$38 TP is based on 16.6x our 2014 EPS. Risks include: outcomes of pending and future rate cases, cost controls, and interest rates.
BWEN Our US$0.90 TP is based on 6.3x our 2013 EBITDA. Risks include a slower-than-expected recovery in US wind power market growth, increased
competition that could pressure gross margins, and BWENs customer concentration.
CMS Our target price for CMS is US$25.50, based on a PE methodology. Key risks include flat or declining electric/gas delivery volumes, changes to the
2008 legislation, lower future allowed ROEs, an inability to earn the allowed ROEs, and general market risk appetite/the level of interest rates.
CNP Our US$21 price target is based on a sum-of-the-parts valuation on 2014E earnings, plus a scenario analysis of how the company J uly deploy cash.
Risks include: deployment of cash (including potential M&A), commodity price exposure and win rates for field services business.
CPN Our US$21 target price is based on 8x our 14 and normalized EBITDA. Risks include lower power prices, economic slowdown and future PJ M
capacity prices.
D Our US$58 price target is based on 14 PE and our sum-of-the-parts analysis. Risks include its regulated utility capex execution, the pace of
economic growth in VA, success in winning gas infrastructure projects, forward power prices.
DTE Our US$61 price target is based on our 2014 sum of the parts PE valuation. Risks include lower allowed ROEs in 2013+, negative changes to the
2008 energy legislation and execution risk at the non-utility businesses.
DUK Our US$70 TP is based on a 14.7x PE multiple of 2014 EPS. Risks include scrutiny of the merger with PGN, ROEs, rate cases, load growth and
economic growth, and market interest rates.
EIX Our US$49 price target is based on our 14 regulated utility (SCE) PE. Risks include the outcome of SCEs pending rate case in CA, SCEs allowed
ROE, capex execution and the level of market interest rates.
ELT Our US$20.50 TP is based on the acquisition offer from Melrose PLC. Risks include closing of the acquisition, competition in the smart metering
space, slower-than-expected growth, and potential pressure on shares from limited float given a private equity overhang.
ENOC Our 12-month target price is US$9.00, based on EBITDA-based SOP and PE valuations. Risks to the upside include additional contract wins and
improvements to guidance. Risks to the downside include pressure from the bad economy inhibiting smart grid industry growth.
ERII Our US$2.75 price target is based on our PER of 30x 2013E EPS plus cash. Risks include: global economy, customer and product concentration,
energy costs and international exposure.
ETR Our US$68 price target is based on a combination of 2014 PER and sum-of-the-parts valuation methodologies. Risks include: forward quark spreads
in the Northeast, extension of nuclear operating licenses for Vermont Yankee and Indian Point, outcomes of utility rate cases.
EXC Our US$40 price target is based on a combination of pro-forma 13.75x 2014 PER and sum-of-the-parts valuation methodologies. Risks include
future quark and dark spreads, retail margins and volumes, and merger synergies.
FE Our US$50 price target is based on a combination of 14x 2014 PER and sum-of-the-parts. Risks include the overall level of power prices in the
Midwest and the Mid-Atlantic, incremental cost synergies with Allegheny, PJ M capacity prices and the pace of economic recovery in the Midwest.
GEN Our US$2.75 target price is based on a 2014 EV/EBITDA methodology. Risks include changes in forward dark spreads, future PJ M capacity prices
and the pace of economic recovery in the Mid-Atlantic.
HE Our US$25.50 target price is based on a sum of the parts on 2014E earnings. Key risks: HI economy, rate cases in a tough regulatory environment,
low interest rates hurting earnings at American Savings Bank.
ITRI Our US$45 price target is based on EV/EBITDA and PER valuations. Risks include contract wins, margin expansion from the company's
restructuring program, growth in legacy businesses, integration of SmartSynch, warranty expenses.
LNT Our US$48 target price is based on a sum-of-the-parts PE valuation of 2014E earnings. Key risks are unfavorable rate case outcomes, economic
sluggishness, investment execution and recovery.
NEE Our US$69 price target is based on a combination of 2014 PER and sum-of-the-parts. Risks include: the outcome of a pending rate case in FL, lower
natural gas prices and further economic slowdown in Florida.
NRG Our US$19 target price, based on generation and retail multiples applied to both 2014 and normalized EBITDA. Risks include future natural gas
prices and dark spreads in TX and the Northeast, future retail margins and volumes.
NU Our US$37 target price is based on a sum-of-the-parts valuation of pro-forma 2014E earnings. Key risks include realized synergies from the NSTAR
merger, delay or cancellations in transmission investments, and economic weakness hurting sales.
ORA Our sum-of-the-parts and 2014EV/ EBITDA-based target price is US$20. Risks include: execution of geothermal capex, margin erosion, extension of
federal subsidies, rate-based geothermal power plants and a need to tap equity capital markets should North Brawley problems continue.
PCG We base our US$43 price target on a 12.8x our 2014 EPS. Risks include recovery of spending related to the San Bruno pipeline accident; penalties
associated with the accident, future equity needs, future allowed ROEs and the equity ratio, the level of market interest rates.
PEG Our US$31 price target is based on a combination of 2014 PER and sum-of-the-parts valuation methodologies. Risks include lower forward power
prices, lower than expected PJ M capacity prices, utility capex execution, slower economic recovery in NJ .
POR Our US$26.50 target price is based on a PE valuation of 2014E EPS. Risks include potential delays in capex for new generation capacity, regulatory
uncertainty, volatility from the PCAM and ongoing economic weakness.
PPL Our US$28 target price is derived from '14E PER and '14E sum-of-the-parts valuations. Risks include ongoing dark spread compression, incremental
delays in transmission capex in PA, regulatory risks in the UK, KY and PA, foreign exchange exposure.
SCG Our US$47 target price is derived from a PE valuation of 2014E utility EPS. Risks include: weak economic growth in the region, the pace of nuclear
capex, the outcome of potential rate cases and the levels of interest rates and inflation.
SO Our target price of US$46 is derived from a 15.2x PER on our 2014 EPS. Risks include: changes in regulatory environment including potentially
lower allowed ROEs, changes in market interest rates, slower growth in power demand and delay of nuclear capex.
TE Our US$18 price target is based on a sum-of-the-parts methodology on 2014E earnings. Risks include pricing and cost controls at TE Coal and the
pace of growth in the Florida economy.
UIL Our target price of US$39 is based on a PE valuation of 2014E EPS. Risks include a potential rate case in CT, financing for the capital program,
including equity issuance and extension of decoupling in CT.
WTR Our US$23 TP is based on 19x our 2014 EPS. Risks include: outcomes of pending and future rate cases, cost controls, and market interest rates.
XEL Our target price of US$28 is based on 14.2x our 2014 EPS. Risks include: future allowed ROEs and electric load growth, incremental environmental
capex in TX, multi-year test plans in MN and CO, and the level of market interest rates.
Source: FactSet, Macquarie Capital (USA), J uly 2012
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9 J uly 2012 13
Important disclosures:
Recommendation definitions
Macquari e - Austral ia/New Zeal and
Outperform return >3% in excess of benchmark return
Neutral return within 3% of benchmark return
Underperform return >3% below benchmark return

Benchmark return is determined by long term nominal
GDP growth plus 12 month forward market dividend yield
Macquari e Asi a/Europe
Outperform expected return >+10%
Neutral expected return from -10% to +10%
Underperform expected return <-10%
Macquari e First South - South Afri ca
Outperform expected return >+10%
Neutral expected return from -10% to +10%
Underperform expected return <-10%
Macquari e - Canada
Outperform return >5% in excess of benchmark return
Neutral return within 5% of benchmark return
Underperform return >5% below benchmark return
Macquari e - USA
Outperform (Buy) return >5% in excess of Russell 3000
index return
Neutral (Hold) return within 5% of Russell 3000 index
return
Underperform (Sell) return >5% below Russell 3000
index return

Volatility index definition*
This is calculated from the volatility of historical price
movements.

Very highhi ghest risk Stock should be expected
to move up or down 60100% in a year investors
should be aware this stock is highly speculative.

High stock should be expected to move up or
down at least 4060% in a year investors should
be aware this stock could be speculative.

Medi um stock should be expected to move up or
down at least 3040% in a year.

Lowmedi um stock should be expected to move
up or down at least 2530% in a year.

Low stock should be expected to move up or
down at least 1525% in a year.
* Applicable to Australian/NZ/Canada stocks only
Recommendati ons 12 months
Note: Quant recommendations may differ from
Fundamental Analyst recommendations
Financial definitions
All "Adjusted" data items have had the following
adjustments made:
Added back: goodwill amortisation, provision for
catastrophe reserves, IFRS derivatives & hedging, IFRS
impairments & IFRS interest expense
Excluded: non recurring items, asset revals, property
revals, appraisal value uplift, preference dividends &
minority interests

EPS =adjusted net profit / efpowa*
ROA =adjusted ebit / average total assets
ROA Banks/Insurance =adjusted net profit /average
total assets
ROE =adjusted net profit / average shareholders funds
Gross cashfl ow =adjusted net profit +depreciation
*equivalent fully paid ordinary weighted average number
of shares

All Reported numbers for Australian/NZ listed stocks are
modelled under IFRS (International Financial Reporting
Standards).

Recommendation proportions For quarter ending 30 June 2012
AU/NZ Asi a RSA USA CA EUR
Outperform 55.67% 61.00% 53.43% 42.58% 69.23% 46.60% (for US coverage by MCUSA, 9.05% of stocks followed are investment banking clients)
Neutral 30.50% 22.11% 36.99% 52.41% 28.02% 33.69% (for US coverage by MCUSA, 8.14% of stocks followed are investment banking clients)
Underperform 13.83% 16.89% 9.59% 5.01% 2.75% 19.71% (for US coverage by MCUSA, 0.45% of stocks covered are investment banking clients)


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Macquarie (USA) Research US utilities
9 J uly 2012 14
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Research
Heads of Equity Research
J ohn OConnell (Global Co-Head) (612) 8232 7544
David Rickards (Global Co-Head) (612) 8237 1159
Greg MacDonald (Canada) (1 416) 628 3934
Andrew Root (US) (1 212) 231 2336
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Life Sciences & Technology
J on Groberg (Head of US Discretionary
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Dane Leone (New York) (1 212) 231 6369
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Chris Feltin (Calgary) (1 403) 539 8544
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Financials contd
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Ki Bin Kim (New York) (1 212) 231 6386
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Michael Smith (Toronto) (1 416) 848 3696
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TMET contd
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Andrew Weisel (New York) (1 212) 231 1159
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137