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Distressed Generation Assets: When Is the Price Right?

An overview of the buyer and seller, and a discussion of current values for distressed assets.
Fortnightly Magazine - March 15 2003

This equilibrium assessment is primarily a function of the regional energy markets and does not consider metro-constrained areas that may require peaking resources supported solely through capacity payments.

Our analysis suggests that New York Zone J may achieve marginal equilibrium by 2005 (minimal CCGT economic returns) and move into solid equilibrium by 2009. In contrast, the Boston area may see only marginal market equilibrium by 2010 to 2011. Multiple assumptions, including rational behavior by all market participants and projected load growth, predicate these regional equilibrium assessments.

For other regions, the current overbuild situation, combined with the completion of projects currently under construction, will push equilibrium out several years. We see several regions of the country remaining overbuilt through much of the next 10 years, which suggests prices for generating assets will take some time to recover to full asset value levels.

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