Conservatively, firm's higher valuation does not incorporate any read-across from Texas into other regions. Cross-checking their $80 price target on more traditional metrics, the implied 2008 free cash flow (FCF) yield would be 9.6% and the EV/EBITDA multiple about 8.4x.
The deal TXU apparently commits to scale back TXU's controversial coal plant build from 9.1 gigawatts (GW) to 2.2 GW. Some of this "lost build" may be offset by new gas plants or return of mothballed capacity, with higher heat rates and therefore positive implications for profits of baseload generators (TXU and NRG).
Notablecalls: NRG will most likely see strong buy interest today. Other names with merchant exposure include EXC, EIX and D.