UPDATE: UBS Upgrades GenOn Energy (GEN) to Neutral; Price Reflects Capacity; Takeout Baked In

(Updated - June 13, 2012 11:15 AM EDT)

UBS upgraded GenOn Energy (NYSE: GEN) from Sell to Neutral. PT lowered from $1.75 to $1.50.

Analyst, Julien Dumoulin-Smith, said, "GEN shares are down nearly 44.8% YTD, dramatically underperforming the broader market and IPP peers Calpine (+0.7%) and NRG Energy (-16.3%). We believe much of this underperformance can be tied to PJM’s underwhelming capacity auction results for 2015/16 auction held in May; we believe forthcoming petitions filed by generators could yet support shares."

Still see “takeout” baked in: Our lower SOP is premised on an 8x 2015E EBITDA multiple. We explicitly add ~$100 Mn synergy benefit in a potential deal, reflecting widespread market expectations for an eventual transaction. Without the support of a potential transaction, we believe shares could trade between $0.50-$1.00/share"

For an analyst ratings summary and ratings history on GenOn Energy click here. For more ratings news on GenOn Energy click here.

Shares of GenOn Energy closed at $1.40 yesterday.

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