“The biggest cloud facing the industry over the next 18 to 24 months is an estimated $30 billion of debt that needs to be refinanced in the bank and capital markets,” said Suzanne Smith, S&P analyst in New York. “Much of this debt was incurred to finance the acquisition and construction of power plants in the US.”
Furthermore, a lack of parent company credit support for Dynegy from its largest shareholder, ChevronTexaco, shows that companies can no longer rely on parents for liquidity, S&P added. As part of its new energy merchants rating methodology, S&P intends to observe more closely the way cash is moved between parents and subsidiaries.
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