UBS Raises Rating On GE, Cites Potential For Gas-Turbine Business

TXU deal could mark increase in environmental considerations.

UBS Securities Tuesday raised its investment rating on General Electric, noting the potential for the company’s domestic natural gas turbine business to post stronger-than-expected orders this year and next.

In a research note, UBS analyst David Bleustein said the announcement yesterday of TXU’s acquisition by a group of private-equity firms could mark the acceleration of corporate actions influenced by environmental considerations.

“We believe that phenomenon, coupled with still-growing national demand for electric power, could eventually cause a surge in demand for gas-fired turbines in the United States,” Bleustein said.

As reported Monday, a group including Kohlberg Kravis Roberts and Texas Pacific Group said it plans to buy TXU for a total of close to $45 billion, including the assumption of $12 billion in debt. As part of its negotiations, the private-equity group was compelled to negotiate with environmentalist concerning TXU’s controversial plan to build 11 new coal-fired power plants. The group has agreed to limit the number of new coal plants to three.

Bleustein’s price target on GE shares is $45; the shares were recently trading at close to $35.

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