S&P introduces new price assumptions for merchant power exposure

摘要

Standard & Poor's credit analyst, Tobias Hsieh, New York, issued a research update in late October that outlined S&P's approach to analyzing merchant power risk in its credit rating process. Stating that the analysis of merchant power risk requires more than a consistent assumption for the price of power, Hsieh wrote that it also requires consistent assumptions for its two underlying drivers―the price of natural gas and the spark spread. The revised method will displace S&P's net revenue analysis, which has been in use for the past three years. While the net revenue analysis' primary credit metric was the financial cushion, expressed in dollars per kilowatt-year, S&P believes the new approach will provide greater clarity with its focus on traditional credit metrics such as funds from operations, as well as qualitative factors.