Aquila Paying for Loan-Fueled Reprieve

But the stock has never closed that low since. Instead, Dynegy has gone on to reassure investors with a simplified business strategy and surprising profits that have turned the stock into an "eight-bagger" in just over half a year. Shares of Dynegy continued to inch up, tacking on 6 cents to hit $5.09 on Thursday.

Some of the industry's most troubled players -- including Williams (WMB Quote) and El Paso (EP Quote) -- have posted similar gains. Still, industry critic Karl Miller insists that the sector's woes are far from over.

"This market does not fix the problem," said Miller, a former industry executive who now leads a power acquisition firm. "These companies are still going to fall down very, very hard."

Shaking Off the Rust

But for now, some immediate dangers have clearly passed. As recently as March, Forbes ranked six utilities and energy merchants -- including Aquila, Allegheny Energy (AYE Quote), CMS (CMS Quote) and El Paso -- among its top 10 list of likely bankruptcy candidates. But companies throughout the sector have since gone on to refinance loans and put off reckoning day a while longer.

For Aquila, that means paying more than 10% in interest and fees annually. Barone estimates that those costs, coupled with merchant-related losses, will push Aquila to a full-year loss of 55 cents a share. While he expects annual losses to narrow to 25 cents a share in 2004 and 2005, he foresees no improvement in the company's cash-generating ability.

Indeed, he expects things to only get worse.

"Due to its asset sales program, we expect Aquila will continue to generate cash and pay down debt over the next 18 months," he wrote. "However, we forecast Aquila will be cash flow negative in 2005 and beyond."

On average, most analysts recommend holding the stock. No one recommends buying it.