US utilities on record borrowing spree, sells $90 billion in bonds

Bloomberg

US utilities are on a record borrowing spree this year, selling more than $90 billion in bonds for the first time ever.
The surge in debt from NextEra Energy Inc, Duke Energy Inc and other power giants comes as interest rates are at historic lows, leaving investors hungry for the safe and relatively strong returns offered by utility bonds.
The trend has implications that reach far beyond bond markets and company balance sheets. Utilities are in the midst of a sweeping transformation to modernise grids and slash emissions by replacing coal plants with wind, solar and cleaner-burning natural-gas generators. The flood of cheap cash from bonds is making that possible.
“Financing costs are lower than we ever thought they would be,” Morgan Stanley analyst Stephen Byrd said. “The low-interest rate environment helps the deployment of renewables.”
There is, however, reason for concern. Capital spending by energy companies is set to reach an all-time high of $136 billion in 2019, according to industry group Edison Electric Institute. And net debt for utilities in the S&P 500 index rose to an average 5.4 times earnings before interest, taxes, depreciation and amortisation, up 34% from five years ago.
While utility credit ratings remain strong, they could take a hit if current levels of spending and borrowing continue.