Business & Money
The consequences of exuberance are all around us.
Much of the 160 GW of new generation capacity added to the U.S. inventory since 1998 is now under water, economically speaking. At a per-megawatt cost of $300, this represents $50 billion of investment-much of which is concentrated in Texas (23 GW), Illinois (14 GW), and Georgia (11 GW). The key question for both merchant and other plant owners is how long it will take for plant values to recover.
Business & Money
Obtaining a position measurement in energy markets has become more complex and has increased financial risks for integrated utilities.
"What's your position?" The answer to that simple question in today's energy markets is anything but simple. In fact, answering this question may be the single most difficult challenge faced by a fully integrated energy firm in its efforts to manage risk.
FERC should consider a two-part tariff to boost transmission investment.
Transmission, rather than generation, is generally the constraint preventing customers from getting the power they desire.
An evolving market demands a greater focus on power prices and required return on equity.
Valuation can be difficult even in stable markets, and executives setting their company's strategic course need to understand how the market for power projects is evolving and what may lie ahead.
Today's volatile markets upset the discounted cash flow model, and others.
DCF Utility Valuation: Still the Gold Standard?
A surprisingly timid effort for an industry on the brink.
The purpose for the Committee of Chief Risk Officers (CCRO) recommendations, as stated in the introduction to their 198-page opus, is "to provide guidance on new methods and tools to establish a strong foundation for future growth in this (merchant energy) industry." But the reality is that the recommendations, almost without exception, fail to provide strong leadership in the areas of past and potential future abuse.
The new CROs are bringing back much-needed discipline to restore investor confidence.
Scott Smith's title is senior vice president and chief risk officer. But when he's out of earshot, some people at AEP call him the chief SOB.
"I'm not a popular guy," Smith says half-jokingly. "I continually get comments about what a pain I am. My people are aggressive and they don't take any crap."
Understanding power company volatility in the context of valuation theory.
Experts debate how energy companies should be valued in the wake of electric restructuring and Enron.