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Assignment III - Central KSU Assignment 3 Excel Company...

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Unformatted text preview: Central KSU Assignment 3 - Excel Company Risk Factor Research Spreadsheet Souther Vermont Progres Calpine n Con Public Existing and Company s Corporati Compan Edison Service proposed federal Energy on y Risk Categories Count % Count % Count % and state RPS % Corporati Count Count and energy on efficiency, as Industry/Market Risk 4 17% 2 ### 1 17% 1 5% 1 Changes in the competitive environment could have a profound effect on a company. Events in this area could range from an increase in market share of competitors, changes in win ratios against those competitors or other factors related to the competitive environment. In addition there may be factors that effect the industry as a whole, such as change in demand, industry stability or business consolidations. Many of the risk in this category are beyond the span of control of the organization. Legal and Regulatory Requirements (Internal/External) Changes in laws or regulations could effect business processing. Concerns in this area may include changes in corporate tax laws, government required mandates such as the recent changes in consumer debt disclosures, acts of congress such as the SarbanesOxley Act in the United States, or changes that might results as the company becomes listed as a public company. There are also many industry requirements that while not laws must be complied with for the company to be allowed to continue in business. An example of this is the Payment Card Industry Data Security Standards (PCIDSS), which requires companies handling consumer credit card information to provide adequate security over the information. While not a government requirement, companies must still comply. 4 17% 4 ### 1 17% well as economic Changes in the support for regulation of the renewable power markets sources of in which we power under the o .S economic Uperate could nstimulus egatively impact could legislationus. Competition adversely impact could adversely our operations. a are subject We ffect our p other complex to erformance. governmental regulation which could adversely affect our 6 operations. Existing and future anticipated GHG/Carbon legislation could adversely affect our operations. Transfers of our equity, or issuances of equity, may impair our ability to utilize our federal income tax NOL carryforwards in the future. Changes in the regulation of the power markets in which we operate could negatively impact us. Proposed financial reform relating to derivative transactions, as well as certain financial institutions, could have an adverse impact on our ability to h age 1 Pedge risks associated with our business. Accounting for our hedging activities may % 8% We could recognize financial losses as a result of volatility in the market values of derivative contracts. We bear the risk of a counterparty failing to perform. 30% We are subject to substantial utility-related 1 regulation on the federal, state and local levels, and changes in regulatory or legislative policy could jeopardize our full recovery of costs. Antitakeover provisions of Vermont law, our articles of association and our bylaws may prevent or delay an acquisition of us that stockholders may consider favorable or attempts to replace or remove our management that could be beneficial to our stockholders. 8% CenterPoi nt Energy Count % 1 9% Disruptions at power generation facilities owned by third parties could interrupt our sales of transmission and Our insurance distribution coverage may services. not be sufficient. Insufficient insurance coverage and increased insurance costs 1 could adversely impact our results of operations, financial condition and cash flows. Rate regulation of our business may delay or deny our ability to earn a reasonable return and fully recover our costs. We may not be successful in ultimately recovering the full value of our true-up components, which could result in the elimination of certain tax benefits and could have an adverse impact on our results of operations, financial condition and cash flows. 9% result in a reduction in our revenue, operating cash flows or result in our customers, counterparties, vendors or other service providers KSU Assignment 3 - Excel Company Risk Factor Research Spreadsheet failing to perform under Souther Progres Calpine their contracts n Con with us. Company s Corporati Transfers of our Compan Edison Energy on equity, or y Risk Categories Count % Count % Count % issuances of Count Geo Political Risk 1 4% 2 ### 0% eiquity, may 0 mpair our ability to utilize Adverse political actions in a country our federal where services are provided or goods income tax NOL are manufactured could impede ability carry forwards to generate and collect revenue. These in the future. risks might include country wide none listed We have political unrest, wars, State substantial Department sanctions, and embargoed liquidity needs country status. They might also include and could face terrorist acts, union/strike or actions liquidity Financial Risk p 6 26% 7 ### 1 17% Our ressure. 7 substantial (Internal/External) The lack of proper financing of indebtedness business operations could have a could adversely significant impact on a company’s impact our ability to achieve business goals and financial health objectives. This area focuses on the and limit our internal finance process and controls operations. We and as well as external factors such as may utilize additional cost of capital through debt, project capital availability. They may also be financing, caused by currency fluctuations, preferred equity substantial changes in tax rates, and other types inadequate cash flow or supplier of subsidiary payment risk financing Catastrophic Loss 2 9% 2 ### 0% transactions 0 when appropriate in This may fall into two major the future, which categories; catastrophic events such as could increase natural disasters; hurricanes; tornados; our debt and floods or other natural causes, or may be manmade disasters such as major structurally power outages, terrorist attacks, or none listed senior to other significant and pervasive cyber attacks, debt such as our such as viruses or distributed denial of First Lien Credit service attacks. In addition the loss of Facility and our one or more major customers, while an First Lien Notes. entirely different scenario, could have We may utilize similar consequences project financing, preferred equity and other types of subsidiary financing transactions when appropriate in the future, which could increase our debt and may be structurally Page other 2 senior to debt such as our First Lien Credit Facility and our First Lien Notes. Central Vermont Public Service % Corporati Count 0% We areon to 1 subject 35% 0% the effects of changes in Vermont state government resulting from elections of public officials, iur business is Oncluding the governor local, affected by and appointees and national of the PSB. worldwide 2 economic conditions, and Unexpected ice, due to current wind volatility, marketand snow s e have a wtorms or extraordinarily number of cash severe weather flow risks. We can dramatically are subject to increase costs, investment price with a significant risk due to equity lapsearket m of time before we fluctuations and rinterestthese ecover rate cchanges, which osts through our rcould result in ates. Extreme 2 weather higher conditions, contributions and bmore cash reakdowns, wutflows.of oar, acts terrorism or other occurrences could lead to the loss of use or destruction of our facilities or the facilities of third parties that are used in providing our services, or with which our electric facilities are interconnected, and could greatly reduce cash flows and increase our costs of repairs and/or replacement of assets. % 8% 17% 17% CenterPoi nt Energy Count % 0 0% The unsettled conditions in the global financial none listed system may have impacts on our business, liquidity and financial condition that we 3 currently cannot predict. If we are unable to arrange future financings on acceptable terms, our ability to refinance existing indebtedness could be limited. Our receivables are concentrated in a small number1 REPs, of and any delay or default in Climate changes payment could could result in amore frequent dversely affect oevere weather s ur cash flows, efinancial vents and condition and warmer results of temperatures ohich could perations. w adversely affect the results of operations of our business 27% 9% Central KSU Assignment 3 - Excel Company Risk Factor Research Spreadsheet Souther Vermont Progres Calpine n Con Public Company s Corporati Compan Edison Service Energy on y Risk Categories Count % Count % Count % Count % Corporati Count on Strategic Risk 0% 1 5% 0% 0 0% 1 This involves decisions the company makes about direction, product mix, and target markets. Proactive management of this risk is necessary to ensure the future success of a company. The risk is quite critical as lack of attention in this area, may have an impact on all other areas. This area may include such things as: Inappropriate Portfolio of products or services, Lack of long term planning, Products to complex for customer use, Innovation risk market timing 0% Reputation/Brand Risk Environmental These are risk the company may face as a result of conducting business that could either cause significant fines and penalties, or preclude the company from conducting business. They may include: Actual or potential threat of adverse effects on living organisms and environment by effluents, emissions, wastes, resource depletion, etc., arising out of an organization's activities Adoption of new accounting pronouncements and application of accounting guidance for regulated operations can impact our financial results. none listed 0% 1 17% These are risks that may affect a company’s ability to conduct business. They may include such areas as negative publicity, significant loss of revenue, litigation, loss of clients and partners, exit of key employees, share price decline, difficulty in recruiting talent. They are issue that may affect public confidence or trust in a company, thus causing the public to take its business elsewhere 1 5% Our principal shareholders own a significant amount of our common stock, giving them influence over corporate transactions and other matters. 1 4% 2 ### 0% 0 none listed Page 3 % 8% 0 CenterPoi nt Energy Count % 0 0% none listed 0% 0 None Listed 0% none listed We are subject to extensive federal, state and local environmental regulation that 2 could have a material adverse effect on our financial position, results of operations or cash flows. Greenhouse gas emission legislation or regulations, if enacted, could significantly increase the wholesale cost of power, capital expenditures or operating costs. .Climate change legislation and regulatory 2 initiatives could result in increased operating costs and reduced demand for our services. We are subject to operational and financial risks and liabilities arising from environmental laws and regulations. 0% 17% 18% If we were deemed KSU Assignment 3 - Excel Company Risk Factor Research Spreadsheet to have Souther market power in Progres Calpine n Con certain markets Company s Ca result of the as orporati Compan Edison ownership of Energy on y ur stock by Risk Categories Count % Count % Count % oCount certain Customer / Supplier significant 3 13% 0% 1 17% shareholders, we 2 Contracting Risk could lose Concerns in this area may include FERC issues such as inappropriate pricing, a authorization to customer or supplier not meeting sell power at commitments, an inadequate wholesale at understanding of the customer from a market-based relationship perspective, the lack of rates in such ability to satisfy a clients controls markets or be requirements, cost price renegotiations, required to Service Level Agreement penalties, engage in and the ratio of long term contracts mitigation in Human Resource Risk 1 4% 0% 0% those markets. 0 We rely on In most organizations human resources power are the most critical natural resources transmission and of the company. While the most natural gas significant event in this area would be distribution the loss of one or more senior level facilities owned managers, such as the CEO, high and operated by turnover of other levels may be of none listed other equal importance. Risks in this companies. category may include: Lack of available, knowledge or skills or Subject Matter Experts, Inadequate comp or benefits, Lack of leadership, Poor communications, HR policy compliance Page 4 Central Vermont Public Service % Corporati Count on 10% 1 0% We have risks related to our power supply and wholesale power market prices and we could be exposed to high wholesale power prices that could be material. 0 None Listed % 8% 0% We and CenterPoint Energy could incur liabilities associated with CenterPoi businesses and nt Energy assets that we have transferred to Count others. We are an indirect 3 wholly owned subsidiary of CenterPoint Energy. CenterPoint Energy can exercise substantial control over our dividend policy and business and operations and could do so in a 0 manner that is adverse to our interests. The creditworthiness and liquidity of our parent company and our affiliates could none listed affect our creditworthiness and liquidity. % 27% 0% A prolonged economic downturn could KSU Assignment 3 - Excel Company Risk Factor Research Spreadsheet in a Souther result Progres Calpine reduction in our n Con revenue, Company s Corporati Compan Edison operating cash Energy on or result y Risk Categories Count % Count % Count % flowscustomers, Count in our counterparties, Process /Operational 0% 1 5% 1 17% vendors3or other Performance Risk service Processing risks are made up of a providers failing number of factors that contribute to to perform under failures in execution of business their contracts operations. Any of the following with us. Our factors may degrade the overall financial performance of the company and performance is increase costs of operations: No clear impacted by processes defined, Defined process not price followed, Lack of performance fluctuations in metrics, Inadequate Surge capacity, the wholesale Inadequate capacity to deliver services, power and Facilities not meeting customer natural gas requirement, e.g laws/regs As a result, markets and any issues that may contribute to these other market factors may be considered operational factors that are risks beyond our control. Our power Information Technology Risk 1 4% 0% 0% generating 0 operations Events in this category could range performance from paradigm shifts in technology involves (shift happens) to new companies who significant risks enter the market with more efficient and hazards and and effective means of delivering may be below services or a lack of response to a expected levels disruptive technology change. These none listed of output or events may result in changes to efficiency. strategic direction. They may include: Lack of secure and reliable IT infrastructure, Inadequate Business Continuity plan, Lack of response to disruptive technology Company Risk Totals 23 21 6 20 Page 5 Central Vermont Public Service WCount e have other % Corporati business risks on 15% related to 1 0% liquidity; An extended unplanned Vermont Yankee plant outage or similar event could have a significant effect on our liquidity due to the potentially high cost of replacement power and performance assurance requirements arising from purchases through ISO0 New England or third parties. % CenterPoi nt Energy Count % 8% 0 0% none listed 0% 0 None Listed none listed 12 11 0% ...
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