U.S. Merchant Power Credit Update: Low Natural Gas Prices And A Slate Of New Regulations Are Creating Uncertainty Apr 11
Standard & Poors, April 2011
Abstract
The U.S. power merchant sector's credit profile has been relatively stable since 2008, largely due to effective natural gas price-hedging strategies. Although Standard & Poor's Ratings Services has taken some limited negative rating actions on independent power producers (IPP), our outlooks are still mostly stable for the sector. The hedging has protected these companies from volatile, and generally declining, natural gas prices during the past two years. Companies have also been able to sell energy at significantly higher prices than spot-market prices from mid-2008 to mid-2010. However, with the rolling off of attractively priced hedges since mid-2010, merchants are forced to lock in much weaker sales prices, a development that will likely harm credit profiles over the next two years,...
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.
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