So the Federal Energy Regulatory Commission (FERC) won't break up the electric utility industry. But it may happen anyway (em if not at the FERC's direction, then perhaps under pressure from state...
Did Power Plant Buyers Pay Too Much?
not move in tandem. At Pace Global Energy Services, we hold the view that a dominant presence in one regional market is preferable to owning one small plant in several regional markets, as economies of scale may be achieved. Of course, a dominant presence in several markets is better still. Think Long and Short. Above all, valuation is a multi-tiered exercise. It must integrate supply and demand, encompassing the value that a plant has as both a power-producing machine and a hedging instrument. Our firm has developed such a multi-tiered approach. While a full presentation of the entire process is well beyond the scope of this publication, a simplified application of a single aspect of the approach can address the question, "Were the prices paid for recent power plant acquisitions too high?" - A.H.
1 This fuel cost assumption is also more consistent with the assumptions used in the confidential Offering Circular for the 144A Bond offering that financed Edison Mission's Homer City deal. 2 While this capital structure is consistent with recently financed transactions, the actual debt-equity ratio for the Homer City deal had a much higher proportion of equity capital.
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