Poor

The California Public Utilities Commission (CPUC) has determined that Southwest Gas’ failure to store more natural gas or to contract in advance for delivery of natural gas for the winter of 2000-2001 was imprudent. The storage situation in California in winter 2000-2001 was one of the major reasons gas prices at the California border soared to nearly $70/MMBtu.

The ratings trend for U.S. investor-owned electric and gas and electric utilities remains “decidedly negative,” with the average rating now at BBB+, Standard & Poor’s (S&P) ratings services said last week in a report card on U.S. utilities.

Williams Cos. took on more water Tuesday as Standard & Poor’s (S&P) lowered the energy giant’s corporate credit rating two notches to “BB+” (junk bond status) from “BBB.” The move followed the company’s second quarter outlook released Monday, which precipitated a stock price drop-off to a 20-year low in trading that day, and sparked speculation that cash-strapped Williams could become the target of a takeover (see Daily GPI, July 23). Williams Cos. stock closed at $1.19 after an 82-cent (40%) plummet in Tuesday’s trading.

Williams Cos. took on more water Tuesday as Standard & Poor’s (S&P) lowered the energy giant’s corporate credit rating two notches to “BB+” (junk bond status) from “BBB.” The move followed the company’s second quarter outlook released Monday, which precipitated a stock price drop-off to a 20-year low in trading that day, and sparked speculation that cash-strapped Williams could become the target of a takeover (see Daily GPI, July 23). Williams Cos. stock closed at $1.19 after an 82-cent (40%) plummet in Tuesday’s trading.

Standard & Poor’s Rating Services on Monday lowered its long-term corporate credit ratings of Dynegy Inc. and its subsidiaries to “BB” from “BBB-“, reflecting the company’s increased use of secured financing that “places the unsecured debtholders at a disadvantage.” The Houston-based company’s ratings also will remain on CreditWatch with negative implications. The “erosion in Dynegy’s core merchant energy business has become more pronounced,” S&P said of its rating. “Despite cutbacks in capital expenditures and costs savings, including a reduction in the common dividend payout, needed incremental cash flow has been slow to materialize.”

Standard & Poor’s Rating Services on Monday lowered its long-term corporate credit ratings of Dynegy Inc. and its subsidiaries to “BB” from “BBB-“, reflecting the company’s increased use of secured financing that “places the unsecured debtholders at a disadvantage.” The Houston-based company’s ratings also will remain on CreditWatch with negative implications. The “erosion in Dynegy’s core merchant energy business has become more pronounced,” S&P said of its rating. “Despite cutbacks in capital expenditures and costs savings, including a reduction in the common dividend payout, needed incremental cash flow has been slow to materialize.”

Standard & Poor’s and Fitch Ratings last week both held to a negative credit watch for CMS Energy Corp. and its subsidiaries, Consumers Energy Co. and CMS Panhandle Pipeline Cos., after the company was able to extend its $450 million revolving credit facility another month. The Dearborn, MI-based company has about $8 billion in debt.

The gas and power marketing and trading business put in a poor financial performance in the first quarter compared to the extremely profitable first quarter of 2001, and gas and electric distribution utilities came in with only average results, according to a detailed analysis by Energy Performance Review (EPR), a Maryland-based information services firm. EPR examined aggregate first quarter results for 117 gas and power companies.

A financial community audience hosted by Standard & Poor’s in New York City was told last Wednesday that in the wake of this year’s energy industry credit and credibility crisis, electricity reserves look adequate for North America through 2008, but energy price volatility is expected to continue, particularly in regard to natural gas. On average, however, gas prices should stay in the $2.75-$3.50/MMBtu range, according to a presentation by Boulder, CO-based researcher Douglas Logan, a principal in Platts Research & Consulting/RDI.