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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Gemlaoshi who wrote (14526)	5/26/2004 2:23:47 PM
From: Steve Lokness	Read Replies (4) \| Respond to of 110194

Gemlaoshi; Guess that explains why Dynergy just walked away from an almost finished NG fired plant here in Washington State. I'm not so sure though that stupid policy making did not play a role. In the background of this unfinished power plant sits another unfinished power plant - WPPSS. This at the time and I think still is - was the largest bond default in American history. Dare we fail to learn the lessons of history, we are bound to repeat them. Such a God awful waste of American resources! steve

To: Gemlaoshi who wrote (14526)	5/26/2004 5:17:45 PM
From: russwinter	Read Replies (2) \| Respond to of 110194

What's your assessment of the sudden surge in sparks prices. Electric generation is picking up very rapidly now, up about 4.43% yoy since mid-Jan. Suggests excess utility plant capacity may be history in many areas of the US, and that the gas fired will be used, perhaps a lot? The theory of Weissman (which I have adopted) is that utilities will have to dip into this "marginal" gas fired for their peaking capacity, pretty much all summer, especially during hot spells like now. Last year's late May, and June power generation, was an outlier, a lucky fluke, extremely low usage because of extended perfect weather. 5-15-03: 66,584 5-22-03: 66,214 5-29-03: 68,063 6-5-03: 72,044 6-12-03: 73,485 We just witnessed 73,541 for the week ending 5-15-2004, and it wasn't even hot yet! We are now getting a test of the real picture with this southern hotter weather on hand through month end. In fact this early summer heatwave in the southern tier seems to really be cranking out big increases in power generation (see my prior posts). Message 20163559 The next several Edison Institute and NG draw releases may offer us a real clue as to what's ahead. If this is the case, are there any reasonably valued utilities left that Wall Street is asleep on?

To: Gemlaoshi who wrote (14526)	5/26/2004 5:34:31 PM
From: yard_man	Read Replies (1) \| Respond to of 110194

good post, except -- your terminology is misleading here ... >>5) Some of the combined-cycle plants in states with low intrastate gas prices (e.g. Texas) can profitably run as baseload capacity. However, most of the combined-cycle and all of the simple-cycle plants act as peaking plants. That means most generate less than 20 percent of nameplate capacity rating. << most peakers have to run close to nameplate capacity -- when they run -- what you mean is capacity factor which is a measure of actual energy produced / theoretical total that could have been produced not capacity. It is not uncommon for peakers to be beneficial and only have an expected capacity factor of less than 10%. If a combined cycle plant doesn't run with an annual capacity factor of greater than 20%, it probably was a malinvestment -- shoulda bought a peaker instead.

To: Gemlaoshi who wrote (14526)	5/26/2004 7:00:34 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

thanks for your comments. i think you may have misunderstood what i meant by stupid policymaking. i wasn't talking about the malinvestment aspect of the capacity adds; i was talking more in a global sense of America's energy policy, and in that context, the significance of additional demand pressure on scarce North American natural gas. (i know i didn't spell that out originally, but i didn't expect an exegesis of a response based on my throwaway comment from an electric utility economist.) as you mention, the infrastructure does not go away, even if much of the $143 billion in original outlays will be liquidated. at liquidation, the assets will be repriced for profitability in the new pricing environment (soft pricing environment, and high input gas price, combine for low asset price requirement). this discounting brings more capacity online and ironically increases natural gas demand, forcing demand destruction in other areas (manufacturing, fertilizer, etc.). it is no secret that a lot of the capacity adds are peaking capacity. but it so happens that this peaking capacity makes it more difficult to build gas inventories in the filling season. without these builds, the country is at the mercy of the weather in the heating season. (in fact, winter heating is at the mercy of the weather even in the summer, since very hot weather increases peaking demand.) so it seems to me there was some very bad policymaking (or rather, a complete absence of same, or lack of coordination between practicality and the environmental preferences) which allowed this bloating of structural demand through malinvestment. the inevitable liquidation will only accelerate the natural gas crisis imo.