Utility Pension Deficits At $65 Billion Worldwide

December 12, 2002 (PLANSPONSOR.com) - Utility companies saw a 55% increase in pension deficits this year; bringing deficit totals for the industry to $65 billion worldwide, according to a UBS Warburg research outlook.

UBS said in the study that the heaviest exposure was in the United States and the United Kingdom, due to the type of pension funds utilized in these two countries.   Additionally, UBS said the rising pension deficits could have severe consequences for the companies and their investors, according to Reuters

“Cash contributions will have to be made,” UBS said in the outlook. “In some cases there could also be charges against equity. Either way this could significantly deteriorate some already weak balance sheets.”

The report included a list of the 10 companies with the heaviest exposure.   Pension market risk for these 10 ranged from 17% to 111% of their market capital, with funding deficits in 2002 ranging from 11% to 47%.  

The top 10 included six US companies:   Exelon, Public Service, Constellation Energy, Centerpoint Energy, CMS Energy and Mirant.   The remaining four companies were British:   National Grid Transco, Centrica, Scottish Power, and AWG.