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Merchant Power: The Base Load Continuum
01 January 2000
By John O'Connor, Vice President, Duff & Phelps Credit Rating
Over the past two years, with the evolution of the explosive US electric wholesale marketplace, merchant power projects (MPP) have continued to evolve. Since 1997, Duff & Phelps Credit Rating Co. (DCR) has analyzed numerous MPP transactions, both on a private and public basis.
The contents of this paper are based on the transactions we have analyzed and reflect our insights on the following: perspective on market risk and approach to stressing down future market price forecasts; key rating considerations on base-load, intermediate and peaking facilities; generating companies; managing commodity exposure; and structural enhancements.
For a more comprehensive breakdown of DCR's approach to analyzing project finance transactions please see DCR's Project Finance Methodology.
When analyzing MPPs, DCR considers several risk factors. As with all credit analysis, these risk factors can be separated into three distinct categories: business, financial and structural. Business risks include regulatory, market, fuel and operation, while...
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