Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
2008 YEAR IN REVIEW (plus a couple months in 2009!) AAI 9th Annual Energy Roundtable David L. Mohre Executive Director Energy & Power Division NRECA Current, Expected Industry Drivers • • • • • The U.S. and world economy The credit, liquidity crisis Expected legislative initiatives Regulatory initiatives, outcomes Conditions on the ground Current Economy • U.S. stocks off 50%, continuing to fall • U.S. 3rd. Qtr GDP down 6.2% • Most all countries down, most at faster pace, as exports to U.S. fall • Japan exports down 46%! • Many commodities continue to fall • What came first, economic meltdown chicken or credit, liquidity crisis egg? Credit, Liquidity Crisis • Complex financial transactions, ties and guarantees led to falling credit ratings • Falling credit ratings led to margin calls, to liquidity problems, to depressed stocks • Led to “emergency mergers” of those considered “too big to fail” • Led to big questions of appropriate competition policy in those markets For Electric Sector, Credit and Liquidity Crisis Led To: • Initial interest by private equity, M&A • Much higher capital costs • Significant movement from commercial paper and stocks, towards bonds • Large Cap-Ex reductions in short-run, while long-run Cap-Ex plans exploding • Long-term contracts become a must for investment grade financing per Street A Recent Wall Street Quote In this new financial environment, “utilities will need to have access to longer-term, more permanent financing and be able to sell power from new projects pursuant to long-term contracts and not market-based rates” Charles Wortman, Managing Director, JP Morgan Chase Inc Another Recent Wall Street Quote “I think the challenge that we have is that we are trying to build long-term assets with short-term pricing, and that just doesn’t add up, particularly if you want to get something that’s investment grade” Anthony Ianno, Morgan Stanley to FERC A Big Question Can we raise sufficient longterm capital cost-effectively in this new financial environment given the short-term focus of current centralized market designs? Current Legislative Initiatives • Climate Change--- big $$$ • Renewable Portfolio Standards--big $$$ • Transmission for Renewables--big $$$ • Energy Market Transparency • Transmission Siting--- big $$$ Regulatory Drivers • • • • • • • • Transparency of markets—FERC, CFTC? Siting after 4th Circuit opinion Are capacity markets working? Response to GAO, consumers Renewable transmission Smart Grid, Demand Response Will Street finance w/o market change? Edison Mission Summary Disposition Conditions On The Ground • Physical sales in whsle. market down for twelfth straight quarter, fell 7.8% in 3rd Q. • Load: -.8% overall, -5% industrial, 2007 to 2008, February 09 week down 9.7% • Energy, other commodities prices down • Downturn buying us time to fix mess • Consumers lack trust in markets given big rate increases already, want changes; CO2 hidden tax will make matters worse • Md., N.Y., efforts to repeal/change markets