Abstract

Private equity investors are edging into a new investment class: power generation plants. These facilities may offer higher returns with lower risks than other types of asset plays. Power plants found their way into many funds9 portfolios through their acquisition of distressed debt or equity securities. Gradually the funds overcame problems in selling existing facilities at a profit, and some are now investing in new plants and power plant developers. Although the market for power is very dynamic, subject to extremes in its ebb and flow, attractive opportunities exist for investors who can understand and price the risks inherent in such investments.

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