Distressed Generation Assets: When Is the Price Right?

An overview of the buyer and seller, and a discussion of current values for distressed assets.

Three groups of sellers likely will market assets in 2003. First, the same companies that were desperate to sell merchant assets in 2002 will continue to market those same assets in 2003. NRG, Mirant, PG&E National Energy Group, and others will continue to market their operating, under-construction, and development assets in an effort to raise cash and reduce debt. With the fundamentals of the industry unchanged, the only reason to expect these assets to sell in 2003 is that many sellers have taken significant write-downs, which may sufficiently narrow the "bid-ask" spread on these assets to allow buyers and sellers to reach agreement.

The second and often overlapping group of sellers will be those with large debt maturities in 2003. This year Mirant has $1.6 billion in debt expiring, Williams has $2.25 billion, and Reliant Resources has an astounding $3.7 billion.