Ahead Of The Bell: Allegheny Downgraded To 'Hold'

NEW YORK (AP) — Allegheny Energy Inc. shares have reached a fair value given the decline in market heat rates, an analyst said Monday as he downgraded the utility company's stock to "Hold" from "Buy."

Jefferies & Co. analyst Paul Fremont said the Greensburg, Pa.-based faces key risks including the operational performance of its merchant plants and exposure to changes in commodity prices.

This year the company's merchant plant availability, part of a critical element of the company's earnings, dipped from the prior year due to needed plant improvements.

Fremont said the company's merchant generation business, which remains exposed to changes in commodity prices, has faced margin pressure with the fall of natural gas prices.

Fremont lowered his share price target to $28 from $29. He maintained his full-year earnings outlook at $2.20 per share, but slashed his estimates for 2010 and 2011.

Shares of the company closed at $25.85 on Friday.