Abstract
A merchant plant is a generator that sells its energy and capacity into an open market and as a result is exposed to fluctuations in sales volumes and prices. Merchant plant credit analysis is an evolution of the fundamental analysis that Moody9s has long undertaken when rating electric utilities and independent power projects (IPPs). The agency believes that the ratings of a merchant plant will be lower than that of a traditional single-asset IPP with the same capital structure and cash flow coverage of interest because of the greater volatility of its cash flows. The appropriate analytical beginning is to determine a creditable market forecast and to assess a project9s break-even position relative to the market forecast.
Published Version
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