High LeverageRelatively high leverage reduces financial flexibility and raises refinancing risk, especially if interest rates rise or cash flows soften. Elevated debt levels can constrain capital allocation, increase interest burden, and limit the firm's ability to pursue opportunistic investment or absorb shocks without external funding.
Free Cash Flow VolatilityLarge, ongoing capex drives negative or volatile free cash flow despite solid operating cash generation. Persistent negative FCF forces reliance on debt or equity financing for growth, complicates deleveraging, and limits ability to return cash to shareholders or build liquidity buffers over the medium term.
Merchant & Fuel Price ExposureA portion of generation sold on merchant markets and dependence on thermal fuel prices create earnings volatility. Fuel-cost pass-through is contract-dependent; absent full hedging or PPAs, merchant exposure and fuel price swings can materially affect margins and cash flows across cycles.