Shares of Mirant Corp. touched an 18-month low Wednesday after an analyst downgraded the power plant owner, citing concern about the company's use of coal.
The stock slipped $3.03, or 8.7 percent, to close at $31.63. Earlier in the day shares hit $30.90, a level not seen since January 2007.
Lehman Brothers analyst Gregg Orrill cut his rating on the Atlanta-based company to "Equal-weight" from "Overweight" and his price target to $35 from $44.
The new target implies he expects the stock to rise 1 percent over Tuesday's $34.66 close.
"The basic problem is that Mirant is a user of high cost Eastern coal in a power market where gas sets the price of power (70 percent to 80 percent) of the time," Orrill said in a note to clients.
The end of the company's current hedges on coal prices in 2011 will likely expose a "dark spread" compression and a dip in PJM capacity from an average of $213 megawatts per day in 2009 to $135 megawatts today for 2011.
PJM refers to PJM Interconnection, a regional transmission operator that controls part of the power grid in parts of the eastern U.S.
The Atlanta-based company is also at risk connected to carbon dioxide as it is primarily a coal-fired generator, he said.
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