AEG Partners
LA photoLawrence M. Adelman



CD photo
 Craig S. Dean
April 2013

If there is one thing that seems to characterize today's market, it would seem to be lack of clear direction. What looked like strong economic momentum early in the first quarter of 2013 has cooled substantially since then. Many companies seem to be stuck in neutral, having difficulty driving growth and yet not in a position to address balance sheet issues. Lenders, on the other hand, appear to be reluctant to take aggressive action on defaulted credits when there is not a logical path to exit. The limited bidding and disappointing results in recent sale processes such as Supervalu and Hostess Brands would seem to reinforce the wisdom of being cautious.
For both healthy and stressed companies, our investment banking friends report M&A activity continues at a slow pace, unusual since the two markets are typically counter-cyclical.  Most of the deal action today seems to revolve around recapitalizations, a word which not all that long ago could not be spoken in polite company.
In this newsletter, we introduce Barry Best, who recently joined us to lead the formation of AEG Capital LLC.  In addition, we highlight a few recent restructuring engagements while AEG's Vik Dua writes about the shifts in the energy sector and the negative impact it is having on coal powered producers.
Recent Engagements


AEG News
Barry Best, Managing Director, recently joined AEG from Sagent Advisors to lead the development of AEG Capital LLC...learn more here
Larry Adelman, Principal, will moderate a panel on People Management: How to Recruit, Retain and Rebalance Your People at the Turnaround Management Association Senate running from May 14th - 16th in Chicago
Featured Article
Seismic Shift in Energy Production Puts Coal-fired Producers at Risk

There has been an epic shift in energy production, a shift so drastic that it could knock coal from its perch as the king of electric energy while catalyzing a move towards energy  independence in one fell swoop.  Natural gas is  making a move, a strong move toward becoming the electric energy source of choice.  This move is being catalyzed by a confluence of factors, including a rash of recent domestic natural gas discoveries, slowed domestic energy demand growth and increased EPA regulations.  The result is an increased number of mothballed and shuttered coal plants dotting the Central-Eastern US, including the Mid-Atlantic and Ohio-river valley areas.  Energy from natural gas plants is replacing coal-fired facilities, as many of these plants are aged and have long out-lived their expected usage.
According to the Energy Information Administration (EIA), the amount of coal-fired energy generation capacity expected to be retired between 2012 and 2016 (see Figure 1) is approximately 27 Gigawatts (GW) and is four times the amount of capacity that has been retired over the previous five-year period (6.5 GW)1. In addition, 2012 was a record year for retirements with approximately 7.9 GW of coal-fired capacity being retired, versus 2.6 GW
in 2011 and an  average of 1.0 GW each year between 2006 and 2010. This is likely the largest year on record for coal retirements; however, if expectations hold, 2015 may actually surpass 2012 with almost 10 GW of coal-fired capacity expected to be retired2. Of the planned and annouonced plant closures, most are located in the Mid-Atlantic and Ohio-basin regions, which reflects where US coal reserves were believed to be primarily located in the 1950's when these plants were constructed. Two recent closures in Chicago, The Fisk and...continue reading
Coal Map
Figure 1 - Expected Coal Plant Retirements.