In an industry that is among the most capital-intensive in the United States, the ability to produce credible, independent assessments of creditworthiness has never been more necessary.
Over the course of one and a half days, "Power and Gas Credit Analysis" shows you how to evaluate credit risk at every level of a utility, from the operating company up to the holding company. The course covers regulated electric and gas utilities, as well as independent power generators and competitive energy providers.
For professionals within the industry, "Power and Gas Credit Analysis" is a comprehensive overview that broadens your context and breaks you out of your silo, allowing you to see the connections between your role, the enterprise finance functions, and the debt capital markets.
For outside credit analysts, the course is just as useful. Through lectures, classroom exercises and case studies, you'll come to understand the risk factors unique to the power and gas sectors, allowing you to produce the analysis your job requires.
Just as important, class size is limited to 35 participants. A small class size makes for a better learning experience. But it also limits the number of registrant we can accept. Please register as soon as possible to avoid disappointment.
DAY ONE
Registration and continental breakfast open at 7:30 a.m. Program begins at 8:30 a.m.
Overview of Utility Credit Analysis
• How credit analysis is used
• The role of credit agencies and the implications of their actions
• Statistical basis of ratings (probability of default and Loss Given Default)
• Alternatives to traditional ratings
Overview of the Electric and Gas Sectors
• Size and scope of the industry
• The unique aspects of credit analysis for the electric and gas sectors
• Why the utility sector is less correlated to macro trends than other sectors
• Distinguishing features of utilities with monopoly status versus competitive energy providers
The Economic and Regulatory Environment
• State economic regulation of utility tariffs and the impact on credit analysis
• Cost-of-service ratemaking and other models
• Commodity price recovery
• The federal regulatory bodies; changing environmental regulations
• The introduction of competition in the electric and gas sector
Corporate structure and credit implications
• Ownership structure of the utility and its relationship to credit
• Capital structure and major types of debt
• Holding company groups and parent/subsidiary relationships
Case Study
The corporate structure, capitalization and business profiles of an electric utility, an independent power producer, and a holding company group
Utility Accounting
• The importance of sustainable cash flow; cash flow measures of leverage
• Key drivers of cash flow for utilities and non-utility energy providers
• Commodity price sensitivity and its effects on the financial statements
• The relationHsip between regulatory accounting and financial accounting
• GAAP earnings versus free cash flow
• Implications of positive or negative free cash flow in this sector
Financial Ratio Analysis
• Best practices in use of financial ratios in the power and gas sector
• Peer company analysis
Case Study
Analyzing credit ratios, comparing ratios against comparable peers and rating agency target ratios
Qualitative Analysis of Management Strategy and Experience
• The array of corporate strategies and management risk appetites
• Management experience and the ability to articulate vision/mission, and to execute a successful strategy
• Risk management in the utility and related sectors; hedging strategies
• Different methodologies to assess business risk
Energy Trading Risk and Derivatives Exposure
• Use of physical contracts and derivatives
• Management disclosure of price risk and price risk management
• Other sources of trading risk, e.g. counterparty credit, liquidity, basis
Liquidity Analysis
• Sources of internal and external liquidity
• Capital expenditures, internal and external funding sources
• Commodity exposure, energy trading markets and liquidity
The Structure of Corporate Bonds and Bank Agreements
• Secured and unsecured lending
• Who is the borrower and the impact on the credit decision: Holding companies, utilities, merchant generators, non-recourse projects
• Covenants and events of default; cross defaults
Case Study
Analyzing Dynegy's security package, covenants and events of default
Day One concludes at 5:15 p.m., followed immediately by a cocktail reception for attendees.
DAY TWO
Continental breakfast opens at 8:00 a.m. Program begins at 8:30 a.m.
Project Finance and Non-Recourse Infrastructure Structures
Guest Instructor: Orli Almog, Managing Director, UniCredit
• What are the typical structure, tenors, terms and conditions?
• Is it really non-recourse? What sort of recourse might exist?
• Key elements in the credit analysis and key ratios
• How does "non-recourse" or "limited recourse" project debt affect the credit of a corporate sponsor?
Case Study
NextEra Energy and the use of limited recourse financing
Insolvency, Bankruptcy and Recovery
• Insolvency and consequences
• The primary drivers of bankruptcy and insolvency in the sectors
• The bankruptcy and reorganization process
• Recovery experience and recovery analysis for utilities and gencos
Case Study
Bankruptcies and reorganizations of a utility and a competitive generator; contrasting methods of bankruptcy valuation and recovery by creditors
Warning Signals
• Regulated utilities
• Gencos and non-regulated energy providers
• Holding companies
• Symptoms of deteriorating credit standing: financial, non-financial and market indicators
Developing A Rating: Conclusions and Discussion
• Consolidating multiple analyses to develop a comprehensive assessment of an institution's creditworthiness
• Combining the qualitative and quantitative analysis for a credit analysis
• Quantitative and market-based alternatives for credit ratings
• Identifying emerging issues in the power and gas sector and their credit implications
Program concludes at approximately 12:00 noon.
This live group seminar is eligible for 12.0 CPE credits. Be aware that state boards of accountancy have final authority on the acceptance of individual courses for CPE credit. As of January 1, 2002, sponsored learning activities are measured by program length, with one 50-minute period equal to one CPE credit. One-half CPE credit increments (equal to 25 minutes) are permitted after the first credit has been earned in a given learning activity. You may want to verify that the state board from which your participants will be receiving credit accept one-half credits.
Credit, risk and accounting professionals within utilities seeking an integrated perspective on their work. Investors in taxable and tax exempt bonds. Investors in corporate commercial paper. Bank lenders and investment banking associates. Contractual counterparties doing business with companies in the sector, such as equipment and fuel vendors, and participants in derivative contracts.
Presumes that participants are familiar with basic corporate accounting principles.
Attendees leave SNL Energy training seminars with practical tools and greater insight into the power sector, delivered by professionals from within the power sector who have successfully faced the same challenges you face in areas that include rate cases, utility mergers and acquisitions,utilities accounting, credit analysis and valuation. Try us out, and learn why over 1,000 energy companies, commercial and investment banks, investment managers, regulators, and others trust SNL Energy to provide their professionals with market leading training and intelligence solutions.