Doing Deals in Disheveled Deregulating Markets

Abstract

Parties contemplating power-asset purchase and sale deals need to take into account the disheveled state of regulation in the current environment that has the potential to create institutional transactional barriers and obscure transaction valuation as well. Because the measuring rods for the significance of evolving legal/regulatory requirements are time, cost, and possible long-term impediment to success, the key issues are: 1) Which regulators are in charge? 2) Have the standards that these regulators apply in the approval process remained constant? 3) Are the applicable standards consistent and clear in formulation? The safe approach appears to be to assume FERC's reluctance to permit a transaction with the potential of marginal pricing power, to develop financing whose credit support does not depend on parent cross-subsidies, to evaluate all pricing on both MBR (market-based-rate) and non-MBR pricing assumptions, and to simplify corporate capital structures.