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Strategies & Market Trends : IPPs and Merchant Energy Co.s
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To: Larry S. who started this subject9/30/2003 3:24:15 PM
From: RCMac  Read Replies (1) of 3358
 
Article on power market from DJ Newswire:
Message 19356603

Excerpt:

"NEW YORK -- The glut of U.S. power plants, which some experts said would last from 5 years to 10 years, disappeared in just a few days in much of the country earlier this week.

The profitability of a new, efficient gas-fired turbine in Texas soared to a stunning $143 a megawatt-hour for the 16 on-peak hours Wednesday from a very healthy $39/MWh Tuesday and just $5/MWh a week earlier. Across the western U.S. on Wednesday, the "spark spread" - or difference between wholesale electricity prices and spot fuel costs - for a new gas-fired turbine averaged $44/MWh.

The spike must have given a bit of relief to the builders of new, merchant power plants like Calpine Corp. (CPN), Mirant Corp. (MIR) and Reliant Resources Inc. (RRI), which have suffered from low power prices for more than a year. It takes an average spark spread of $14/MWh over the course of a year for a new power plant to cover operating costs and debt service if it's running during weekday on-peak hours only, according to industry consultant Cambridge Energy Research Associates, or CERA. An average of $24/MWh provides a 15% return on equity, which would make owning a power plant worthwhile."
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