Change is the only certainty in today’s market.
Asset values, and the value of their associated debt instruments, are being driven in the short term by an extreme fuel market and in the long term by a back-to-basics mindset among electric utilities. Still, asset valuations in most markets are not yet at replacement costs, leaving current investors with a residual level of risk. A perception that power markets are recovering more quickly than expected may be fueling high expectations, but volatile gas and oil prices are creating excitement and anxiety throughout the industry. For some time to come, the only certainty in this market will be change.
The Pulse of Changing Asset Values
The past year has allowed the North American power sector to continue its recovery, but it has been a treacherous time for investing. After sifting through all the recent market developments, the following issues stand out: