Energy firms have more than $100 billion in short- and long-term debt coming due in 2003, which will require refinancing at higher levels to keep the companies afloat financially, said an official with the Federal Energy Regulatory Commission Wednesday.

There is a “significant amount of debt coming mature in the next few years,” which makes the need for industry credit solutions all the more urgent, said William Hederman, head of the agency’s Office of Market Oversight and Investigations, during a joint conference sponsored by FERC and the Commodity Futures Trading Commission (CFTC) on credit issues affecting the energy industry.

The credit ratings of energy companies “continue to go in a negative direction,” and more of the same is expected in the current year, rather than a “turnaround,” he told regulators. The “energy markets are in severe financial distress…There is a loss of confidence,” which is “feeding on itself.”

“We moved in regulation from…where it was about trust-busting to now where we need to do trust-building” in the industry, according to Hederman. There’s been “some responsiveness” to the credit needs of the energy market, but “nobody’s quite hit the nail on the head yet.”

Counterparty risk management, he believes, will be key to rebuilding trust and confidence in the markets. This must be the focus of executives at the top of the corporate ladder — CEOs, for instance — not just those in the back office.

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