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ARCHIVE | Criteria | Corporates | Utilities: Analyzing Energy Trading And Marketing Firms' Credit Quality
Standard & Poors, April 2001
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
Abstract
Deregulation of the energy/utility industry has brought significant opportunity and risks to the business entities competing in these markets. Energy trading and marketing firms face a continuous challenge to mitigate risks in this environment, as their business strength, areas of operations, and, ultimately, their business strategies evolve or change. The broad areas of Standard & Poor's analysis of energy trading firms are commercial position, risk management framework, and financial risk and performance. The latter also includes the firm's capital structure and financial liquidity. Standard & Poor's analysis of an energy marketer's commercial position contains some fundamental areas similar to traditional utility analysis, yet tailored to a marketer. These areas are market presence and diversity, supply access and physical liquidity, and...
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