TY - JOUR T1 - Risky Business JF - The Journal of Structured Finance SP - 55 LP - 61 DO - 10.3905/jsf.2004.55 VL - 10 IS - 1 AU - Rob Latoff AU - Panos Ninios Y1 - 2004/04/30 UR - https://pm-research.com/content/10/1/55.abstract N2 - A classic boom-and-bust cycle has been brewing since the U.S. electricity market became deregulated in the early 1990s. This initial market opening led to massive investment in the industry, oversupply, and, eventually, significant power price declines. Fueled by the subsequent equity market boom, power companies overleveraged themselves and overstretched their budgets in a buying and trading frenzy. The post-Enron downturn resulted in significant value destruction and many bankruptcies. As a consequence of the considerable dislocation created by deregulation and the boom-and-bust cycle, a fundamental industry restructuring is likely to take place over the next few years. Players in the U.S. market can learn from their peers in the U.K. power industry, which has undergone a similar cycle but is about one to two years ahead of the U.S. in its restructuring efforts. The authors see three groups of companies that could influence the structure of the U.S. power industry in the coming months: industrial players, commercial banks, and new financial entrants. To be successful, all players will need three important elements: a detailed industry analysis that provides a more informed perspective of the commodity cycle and the corresponding asset cycle; a portfolio-development strategy that encompasses both risk/return profiling and asset cycle perspectives; and an execution strategy founded on solid risk management principles. ER -