The picture for generation demand may have turned fuzzy in recent months, but over the long haul generators should not experience any major problems in being able to get access to the capital they need to finance their projects, a financial analyst told a FERC-sponsored energy infrastructure conference last Thursday in New York City.

Christine Uspenski, an electric analyst with Charles Schwab & Co., noted that one of the subjects touched upon during the all-day conference was credit issues facing the power industry. “Particularly for those like Mirant that are experiencing a real backlash from the Enron debacle and a general slowdown in economic demand that has contributed to a very different demand outlook than what we saw for generation just 12 months ago.

“Clearly, there’s an overreaction to the strength of oversight and the strength of the credit agencies in how they approach their job and whether or not the metrics they were using were, in fact, appropriate,” the analyst said during a roundtable discussion of energy infrastructure barriers and alternatives to construction.

“Fortunately, I can tell you it will pass,” she continued. “Not tomorrow, but it will pass soon, and I do not think that there has been serious damage done to the ability of generators to finance generation on a project finance basis over the long term,” Uspenski said. “However, the next couple of years may be a little tough.”

As for transmission, Uspenski said that “Wall Street is not seeing people come to the market and ask for funding of large-scale transmission projects.” The analyst said that the way transmission is still being approached, “as far as Wall Street is concerned, it’s still bundled within the general capital expenditure budget that is presented to investors every year or every several years for financing as part of a bundled package.”

When it comes to institutional investor concerns about transmission, “I can tell you that it really is all going to come down to where you as stakeholders make the decision on what cost allocation is going to be,” Uspenski said.

“Because the FERC can set a rate, whether it’s 10%, whether it’s 13[%], but the point is [that] until you the stakeholders … decide what is the most palatable way those costs are going to be passed along to consumers that, ladies and gentlemen, is the regulatory uncertainty that is holding everything up,” she noted.

The analyst said that Wall Street is basically indifferent to whichever path is followed. “If you choose to have a very high insurance, guaranteed, socialized rate structure, then financing for that will be relatively affordable,” Uspenski noted. “If you prefer to have a leaner, more just-in-time, more efficient approach, you will have a different rate of return, but you’re economies will be on the fact that you won’t be overbuilding and have a lot of slack in you’re system.

“Either way, Wall Street will price those for you and it will be fair, but the problem is [that] Wall Street can’t do anything for you, until you as stakeholders have made up your mind,” the analyst said.

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