Standard & Poor's Ratings Services has completed its initial PIM (policies, infrastructure and methodologies) risk-management review of 10 selected U.S. energy companies, primarily merchant-energy firms, pure financial trading companies and unregulated utilities. Among the selected companies were Dynegy Inc, Mirant Corp., NRG Energy Inc., Reliant Energy Inc., Sempra Inc. and TXU Corp. The PIM review represents an expansion of the credit-rating agency's analytical approach to assessing the trading-risk management practices of those energy companies that have significant trading and marketing operations-that trade in the market daily, have open commodity positions, and use financial and/or physical transactions to hedge those positions. Previously, in assessing a company's trading-risk position, "we relied on our well-established liquidity survey, which focuses on liquidity adequacy given certain market stress, and on our capital-adequacy methodology, which measures the discrete risks of market, credit and operational events and estimates the capital needed for these exposures," says Terry A. Pratt, an S&P director in the utility and project-finance group in New York. For more on this, see the July issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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