UBS Maintains a 'Neutral' on GenOn Energy (GEN); What Does CSAPR Really Mean?
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Price: $28.48 -3.69%
Rating Summary:
8 Buy, 8 Hold, 1 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
8 Buy, 8 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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UBS maintains a 'Neutral' on GenOn Energy (NYSE: GEN) price target lowered from $4 to $3.50.
UBS analyst says, "We are modestly increasing our Adj. EBITDA ests in ‘12/’13 to reflect the initial of CSAPR on GEN. Given that current SO2/NOx credits trade at a relatively high $2,600/t and $3,800/t, we make a simplifying assumption that no Tier 2/3 plants dispatch in ’12+ and allowances liquidated. However, using EPA projections we calculate a modest negative impact (inline with mgmt’s 2Q statements); Phase II in ’14 does however have a neg. ~$100 Mn impact given the reduced allocations." (UBS lowers FY11 EPS estimate from (0.06) to (0.08), but slightly raises FY12 from (0.15) to (0.13)."
"Heading into ’12, we see convergence between CSAPR credits and power forwards as necessary. We translate current CSAPR quotes as equivalent to an increase in coal dispatch costs of at least ~$30/t or $12/MWh, far from currently reflected in power forwards. We est. at least a further $3/MWh jump in PJM forwards in 4Q."
For more ratings news on GenOn Energy click here and for the rating history of GenOn Energy click here.
Shares of GenOn Energy closed at $3.11 yesterday.
UBS analyst says, "We are modestly increasing our Adj. EBITDA ests in ‘12/’13 to reflect the initial of CSAPR on GEN. Given that current SO2/NOx credits trade at a relatively high $2,600/t and $3,800/t, we make a simplifying assumption that no Tier 2/3 plants dispatch in ’12+ and allowances liquidated. However, using EPA projections we calculate a modest negative impact (inline with mgmt’s 2Q statements); Phase II in ’14 does however have a neg. ~$100 Mn impact given the reduced allocations." (UBS lowers FY11 EPS estimate from (0.06) to (0.08), but slightly raises FY12 from (0.15) to (0.13)."
"Heading into ’12, we see convergence between CSAPR credits and power forwards as necessary. We translate current CSAPR quotes as equivalent to an increase in coal dispatch costs of at least ~$30/t or $12/MWh, far from currently reflected in power forwards. We est. at least a further $3/MWh jump in PJM forwards in 4Q."
For more ratings news on GenOn Energy click here and for the rating history of GenOn Energy click here.
Shares of GenOn Energy closed at $3.11 yesterday.
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