Fortnightly Magazine - February 2006

Are We Making Any Money Yet?

Measures of generator unit performance are uncertain.

The news is full of stories about Calpine and the difficulty merchant generation players face from the uncertainty and volatility of power markets. Now is a good time to review key measures of performance and profitability under uncertain conditions.

Re-engaging Investors

How the World Bank Group removes generation risks in emerging markets.

Infrastructure investors have had their share of pain over the past few years, particularly in developing countries. Aside from worries about the safety and stability of the investment itself, investors also face a more expensive cost of capital. Political risk insurance cannot remove the uncertainties associated with infrastructure investments, but the combination of sound deal structure and clear and reasonable expectations by all parties can mitigate some of these risks.

Rising Unit Costs & Credit Quality: Warning Signals

With increasing unit costs, the financial prospects and credit outlook for many utilities will depend on their success in passing along such costs to consumers.

The utility sector still has excellent access to the capital and credit markets. Yet, it is never safe to assume utilities will continue to enjoy the same low costs of capital. This is particularly true for companies facing compressed margins, regulatory deferrals or disallowances, and rising debt leverage.

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