power plant supply / demand outlook based on ge ' s turbine order bac klog from our electrical equipment analyst
ssb electrical equipment analyst power supply / demand outlook
* jeff sprague , ssb ' s electrical equipment analyst , has an interesting
perspective on the supply / demand balance for power . his forecast is based
on ge ' s order book for turbines , which we think is an excellent source of
info .
* jeff points out that no orders have been canceled so far .
* although there are slight differences in our estimations of new
plant builds ( his is higher ) and reserve margin ( his is higher ) , we think
this info . supports our view . on the margin , new plant builds exceed
demand , and reduce the tightness in the market , as measured by reserve
margins . we think there will be downward pressure on power prices and spark
spreads in this environment .
i ' ve also attached jeff ' s comments below , which he sent to his clients ,
vis - a - vis the electrical equipment sector and ge in particular , as well as
our recent pc 6 report , for reference . any questions , please call . - ray
> >
jeff ' s sprague ' s ( 212 - 816 - 6699 ) comments :
ge stock has been weak in recent days as concerns about lower power prices
have hurt utility stocks and raised the fear that power capacity is being
overbuilt .
ultimately enough capacity will be deployed in the us , but we do not believe
we are there yet . based on our analysis of ge ' s delivery plans , the us will
reach a 14 % reserve margin ( based on capability at summer peak load ) in
2002 .
we do not expect the industry to ever return to the 20 % + reserve margins of
yesteryear , but 14 % seems far from excessive given the very severe
shortcomings of the electrical grid ( see our 6 / 4 report on the grid ) .
if ge ' s output in ' 03 is flat with ' 02 , reserve margins would rise to a
still reasonable 16 % . ge has filled 90 - 95 % of its backlog for 2003 and has
experienced no cancellations or push - outs in orders to date .
the bottom line is we believe the sell - off in ge is overdone . we will
publish a more detailed report on the supply demand equation in the u . s .
power market in the coming days . please see the attached spreadsheet for a
more detailed analysis .
raymond c . niles
power / natural gas research
salomon smith barney
( 212 ) 816 - 2807
ray . niles @ ssmb . com
s
- pc 6 final . pdf
- sprague - - supply & demand - - client . xls
power plant supply / demand outlook based on ge ' s turbine order bac
klog from our electrical equipment analyst
ssb electrical equipment analyst power supply / demand outlook
* jeff sprague , ssb ' s electrical equipment analyst , has an interesting
perspective on the supply / demand balance for power . his forecast is based
on ge ' s order book for turbines , which we think is an excellent source of
info .
* jeff points out that no orders have been canceled so far .
* although there are slight differences in our estimations of new
plant builds ( his is higher ) and reserve margin ( his is higher ) , we think
this info . supports our view . on the margin , new plant builds exceed
demand , and reduce the tightness in the market , as measured by reserve
margins . we think there will be downward pressure on power prices and spark
spreads in this environment .
i ' ve also attached jeff ' s comments below , which he sent to his clients ,
vis - a - vis the electrical equipment sector and ge in particular , as well as
our recent pc 6 report , for reference . any questions , please call . - ray
> >
jeff ' s sprague ' s ( 212 - 816 - 6699 ) comments :
ge stock has been weak in recent days as concerns about lower power prices
have hurt utility stocks and raised the fear that power capacity is being
overbuilt .
ultimately enough capacity will be deployed in the us , but we do not believe
we are there yet . based on our analysis of ge ' s delivery plans , the us will
reach a 14 % reserve margin ( based on capability at summer peak load ) in
2002 .
we do not expect the industry to ever return to the 20 % + reserve margins of
yesteryear , but 14 % seems far from excessive given the very severe
shortcomings of the electrical grid ( see our 6 / 4 report on the grid ) .
if ge ' s output in ' 03 is flat with ' 02 , reserve margins would rise to a
still reasonable 16 % . ge has filled 90 - 95 % of its backlog for 2003 and has
experienced no cancellations or push - outs in orders to date .
the bottom line is we believe the sell - off in ge is overdone . we will
publish a more detailed report on the supply demand equation in the u . s .
power market in the coming days . please see the attached spreadsheet for a
more detailed analysis .
raymond c . niles
power / natural gas research
salomon smith barney
( 212 ) 816 - 2807
ray . niles @ ssmb . com
s
- pc 6 final . pdf
- sprague - - supply & demand - - client . xls