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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (33997)	3/31/2009 11:50:11 PM
From: Spekulatius	Respond to of 78750

re Coal - Coal is not going away but regulators or the government can make it more expensive. Many coal plan will require expensive upgrades (For example MIR plants) if they are outdated and even then they are going to be hit by Carbon caps. it's hard to say what these carbon cost are going to do. part of them are going to be paid be the consumer but in some cases (espcially when spare generating capacity is available) coal is going to be substituted by cheap NG. Besides that LT problem we have the short term problem that NG prices are low and the wholesale electric power prices tend to correlate with NG prices (Since NG plants are the swing producers). This is going to pressure margins for all generators including coal plants. Besides that we also have the "cost of capital" problem which will hit the IPP and small cap utilities hardest. I don't see a compelling valuation case for BKH either. BKH trades at 6.7x EV/EBITDA while large cap utilities like ETR with nice nukes <g> trades at 7x EV/EBITDA. Why go with dinky BKH? Chasing yields?