Sparked by what is seen as “increased risk” in Coral Energy Holding LP.’s business profile, Standard & Poor’s Ratings Services (S&P) said that it has placed the company’s ratings on CreditWatch with negative implications.

S&P said the CreditWatch listing on the company (AAA/Watch Neg/NR) also reflects the fact that there are no plans to increase explicit parental guarantees around the day-to-day trading activities of Coral Energy. Houston-based Coral Energy is 90% owned directly or indirectly by Shell Oil Co. (AAA/Stable/A-1+) and Royal Dutch/Shell Group of Companies (AAA/Stable/A-1+), and has no public debt outstanding.

“Coral Energy’s increased merchant activity in both natural gas and electricity has coincided with a period of much greater sector volatility and has prompted Standard & Poor’s to re-evaluate the relationship between Shell and Coral Energy,” said Standard & Poor’s credit analyst John Thieroff.

Energy Performance Review’s recent 3Q2002 power marketer rankings showed Coral Energy moving up from 16th place (2Q2002) to 12th, notching a 74% uptick from 27,200 million kWh sold in the second quarter to 47,400 million kWh sold in the third quarter. In NGI’s 3Q 2002 gas marketer ranking, Coral Energy moved up to eighth from its ninth place seat during the second quarter. The company traded 8.80 Bcf/d of gas in 3Q2002, compared to 7.56 Bcf/d during the previous quarter (see NGI, Dec. 23, 2002).

S&P noted that the parent company continues to provide significant liquidity to Coral Energy in the form of credit facilities, support to power generation agreements, and has a meaningful equity stake in the company. However, the credit rating agency was quick to point out that the lack of explicit parental guarantees covering a substantial portion of Coral Energy’s activities “significantly offsets the value” of that support.

S&P said this fact strains Coral Energy’s credit risk profile at the current rating level. The agency said it expects its review to be completed within six-weeks and has scheduled further discussions with Coral Energy’s management.

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