U.S. energy merchants have moved early this year in refinancing their debt and reducing near-term risks, but the sector overall still has almost $80 billion in debt payments due by the end of 2006, including $23 billion this year, which has to signal a move toward more asset sales and restructuring, according to a report published Thursday by Standard & Poor’s Ratings Services (S&P).

Excluding companies in default, the five companies with the largest refinancing needs from now through 2006, based on maturing debt as a percentage of total capitalization, are Dynegy Inc., Black Hills Corp., Calpine Corp., CMS Energy Corp. and AES Corp. Two companies are in default, NRG Energy Inc. and PG&E National Energy Group Inc. (NEG).

“Many companies in this sector are attaining refinancing packages which push out the maturities with more short-term debt, without addressing the underlying credit issues,” said Arleen Spangler, an S&P credit analyst. “These companies’ long-term challenge is regaining access to the broader capital markets or improving their balance sheets through other methods, such as asset sales.”

The nine-page report, which discusses the status of refinancing negotiations with bank lenders, presents detailed information on the maturing debt, and summarizes several recently completed transactions.

“Companies still appear unwilling to part with certain assets at a price that buyers are willing to pay,” said Spangler. “Until liquidity concerns override the long-term value of these assets, we may not see many plants change hands, therefore prolonging a ‘fair-market valuation’ for these assets. Many management teams are unwilling to accept the fact that their business mixes are unattractive and many of their assets belong in the hands of others that may have a better ability to manage the assets and ultimately extract value.”

S&P’s top 10 rated U.S. power companies with the most refinancing needs between 2003 and 2006 included the following: Duke Energy Corp., $9 billion; El Paso Corp., $7.88 billion; AES, $7.7 billion; Calpine, $7.3 billion; TXU Corp., $6.1 billion; The Williams Cos. Inc., $5.3 billion; Mirant Corp., $4.9 billion; NEG, $4.6 billion; NRG, $4.6 billion; Dominion Resources Inc., $4.5 billion; American Electric Power Co. Inc., $4.4 billion; and CMS, $3.1 billion. Based on total capitalization, however, those with the most refinancing needs were NEG, NRG, Dynegy, Black Hills, Calpine, CMS, AES, Mirant, TXU, Aquila Inc., Williams and El Paso.

Companies with the most refinancing needs to complete in 2003 include NEG, AES, Duke, Calpine, El Paso, Entergy Corp., Williams, AEP, Mirant, NRG, Constellation Energy Group Inc. and Edison Mission Energy. For the next three moths, those with refinancing needs include Entergy, Williams, Mirant, Calpine, Duke Capital Corp., Duke’s Union Gas Ltd., Constellation, PPL Energy Supply and Electric Utilities, Xcel’s PSCo, Dominion and VEPCO.

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