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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (14542)5/26/2004 9:44:51 PM
From: Gemlaoshi  Read Replies (1) of 110194
 
russ,
You are right on target with your analysis. If GDP continues to grow at >5% AND this summer is unusually hot, surplus capacity could start diminishing rapidly. Impacts on individual utilities will depend upon their generation mix and their ability to hedge shot-term fuel prices.

Fortunately, my company only has about 3,000 MW of CT peakers, with most of that under medium/long term gas contracts. Spot price volatility should not be much of a problem unless this situation continues for the remainder of the year. Purchase power was available to us today for $55/MWHr...still cheaper than turn on the CTs. At the moment, we are not changing our forecasts for a return to 2-3% GRP growth, and normal weather year...though watching it closely!!

My personal favorite knocked-down utility stock would have to be Duke. It has a well maintained system (including gas pipelines) in an area that has great growth. It has a dividend yield of 5.5% and is off 50% from 2001. New management has divested their adventure into South America and their losing energy trading business. Writeoffs from those businesses should just about be over, with a potential of returning to the $40-50 range in a couple of years.
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