Troubled markets drive defensive tactics.
The credit crisis has separated the U.S. utility market into two distinct groups: Companies that enjoy financial liquidity, and those that are fighting for their lives.
The most striking example of the latter group is Constellation Energy, whose multi-billion dollar liquidity woes drove it to the brink of bankruptcy in September 2008, and ultimately forced it to sell nearly half of its prized nuclear assets to France’s EDF Group for $4.5 billion.
“Liquidity is of utmost focus,” said Constellation CFO Jonathan Thayer in a December analyst call. “We meet on it daily at a senior management level.”
Across the industry, companies are slashing spending and deferring projects, in hopes of preserving cash and maintaining their all-important investment-grade credit ratings. Companies that planned ahead, and took steps to prepare for a possible market downturn before it occurred, now are reaping the benefits of their shrewd risk-management strategies.
To learn how some of these companies are weathering the market storm, Fortnightly interviewed senior finance executives at four major U.S. power and gas companies—Duke Energy, Exelon Corp., Sempra Energy and Xcel Energy.