Market risks and volatilities are driving asset values higher.
About 10 percent of the power-generating capacity in the United States has changed hands in the past three years.
Ownership has shifted among utilities and independent power companies, and investment funds have flocked to capitalize on energy-market volatilities. How these ownership changes will shape the U.S. power industry in the long term depends on numerous factors, many of them difficult to predict.
“A new market structure is emerging, and it presents more uncertainty than many companies are accustomed to managing,” says Michael Valocchi, a senior managing director with FTI Consulting in Philadelphia. “As a result, in the next phase of asset sales, we will see a greater emphasis on optionality—not just financial value, but also operational and strategic importance.”
How buyers factor the variables and predict the future will distinguish winners from losers in the evolving power-generation industry.
The recent wave of power-plant sales peaked in 2004, with about 47 GW reported that year, according to a database of public records compiled by Bodington & Co., a financial advisory and consulting firm in San Francisco. That wave continued at a somewhat diminished level through 2005, with some 30 GW of net capacity sales publicly reported (see Table, “U.S. Power Plants Sold, 2005”).