From Baron Funds' second quarter commentary:
ITC Holdings Corp. (ITC, Financial) is the nation's largest independent electricity transmission company. The stock declined 10.0% in the second quarter due to concerns regarding the stability of ITC's return on equity given the current low interest rate environment. ITC has been affected by news regarding a complaint brought by a coalition of New England attorneys general regarding the rates in that area. Although ITC is not directly affected by this filing, investors believe that this could be precedent setting which would affect ITC in the future. ITC management continues to believe that FERC will support previously established returns that remain within a zone of reasonableness and that its rate structure will remain intact. In addition, ITC is currently going through the approval process to acquire Entergy's transmission business. The approval process is long as the deal is expected to close in 2013. ITC has previously said that the company will grow earnings at a 15-17% CAGR through 2016 and we think that the Entergy deal could accelerate that growth due to the persistent underinvestment in the Entergy territory and subsequent capital needed to bring that area up to a higher standard of reliability. (Rebecca Ellin)
ITC Holdings Corp. (ITC, Financial) is the nation's largest independent electricity transmission company. The stock declined 10.0% in the second quarter due to concerns regarding the stability of ITC's return on equity given the current low interest rate environment. ITC has been affected by news regarding a complaint brought by a coalition of New England attorneys general regarding the rates in that area. Although ITC is not directly affected by this filing, investors believe that this could be precedent setting which would affect ITC in the future. ITC management continues to believe that FERC will support previously established returns that remain within a zone of reasonableness and that its rate structure will remain intact. In addition, ITC is currently going through the approval process to acquire Entergy's transmission business. The approval process is long as the deal is expected to close in 2013. ITC has previously said that the company will grow earnings at a 15-17% CAGR through 2016 and we think that the Entergy deal could accelerate that growth due to the persistent underinvestment in the Entergy territory and subsequent capital needed to bring that area up to a higher standard of reliability. (Rebecca Ellin)
