Read Credit_Liquidity_Dilemma_White_Paper.pdf

Executive Summary 

The natural gas and electric power sectors of the energy industry have been rocked in recent years by a series of high profile bankruptcies, insolvencies and credit rating downgrades, amounting to credit losses in the billions of dollars for energy and nonenergy companies alike. The poor sector-wide credit ratings have substantially increased the amount of financial liquidity required to provide credit support for commercial transactions. The need for liquidity, however, has occurred at a time when capital has been most difficult to obtain. Because of the large size of these industries (electricity, for example, is one of the largest industries in the nation) this crisis has impacted the economy far beyond the energy sector.

Companies and institutions in all industries, therefore, should be able to identify with and benefit from the lessons learned in these energy sectors. It is naïve to believe that the credit and liquidity problems in these energy sectors are unique to those sectors. As a result, while the specific problems addressed in The Credit and Liquidity Dilemma occurred primarily in the natural gas and electric power sectors of the energy industry, this white paper provides observations and recommendations that are applicable to other businesses or markets as well.