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【出版时间及名称】：
BARCAP-HIGH YIELD INDEPENDENT POWER PRODUCERS-INITIATING COVERAGE AND 2010 SECTOR OUTLOOK-100302
【作者】：barclays
【文件格式】：pdf
【页数】：44
【目录或简介】：
We are initiating coverage of the High Yield Independent Power Producer (IPP) companies
– which constitute most of the High Yield Electric Utility sector – and the securities of
Dynegy Inc (DYN), Mirant Corporation (MIR), NRG Energy (NRG), RRI Energy (RRI),
Energy Future Holdings (TXU), and Texas Competitive Electric Holdings (TXU). In our
sector outlook for 2010, we discuss the following key elements:
􀂄 Business conditions for High Yield IPP companies are likely to remain challenging in
2010, driven by moderately improving electricity demand, elevated reserve margins,
and continued low natural gas prices and heat rates. The combination of these
factors – offset to some extent by the positive effects of existing hedges – will likely
continue to depress margins and lead to flat-to-declining y/y adjusted EBITDA
levels for most companies in the sector.
􀂄 We see the HY IPP companies as relatively well positioned defensively to withstand
the challenging business environment in 2010. Existing liquidity, enhanced in some
instances by actions in 2009 to raise cash through asset sales, is adequate for 2010,
and we do not anticipate covenant compliance issues. In addition, we expect several
companies to continue to use cash to reduce near-term debt maturities, and to
undertake liability management activities to address uneven debt maturity schedules.
􀂄 The prospects for enactment of climate change legislation in 2010 appear to be low,
but we expect the Environmental Protection Agency (EPA) to pursue a number of new
regulatory initiatives under the Clean Air Act, targeting older coal-fired power plants
that have not been equipped with modern pollution control technology. We believe
that the EPA’s administrative actions will force the shutdown of some older coal-fired
plants and require elevated capital expenditures to add pollution control equipment
for other plants; however, we expect these requirements to be phased in over the next
several years. We also expect the medium- and long-term effects of climate change
legislation and potentially more aggressive administrative action by the EPA to be
negative for HY IPP companies with large coal-fired generation portfolios.
􀂄 M&A activity in the sector will likely continue in 2010. We believe further asset sales
and purchases are likely as the companies rebalance their generation portfolios and
seek to bolster liquidity. In addition, one or more company-to-company mergers are
possible as companies seek to achieve greater regional diversity, greater diversification
in their generation mix, and economies of scale. We think the acquisition of a HY IPP
company by an investment grade utility holding company is relatively unlikely given the
IG utilities’ more cautious business strategies, weak equity currency, and large ongoing
capital investment commitments for their regulated utility operations.
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