Credit Scoring

RMG Financial provides credit scoring solutions to the unique needs of credit professionals within the energy industry. Credit scoring in the wholesale energy industry is complicated by the various company types that transact in the energy markets and by the overall lack of statistically significant sample data available in this environment. We utilize our experience in the energy industry, our experience and understanding of financial analysis and our knowledge of statistical methods to produce scoring models that are focused on the varied and changing environments found in wholesale energy trading.

RMG Financial offers both off-the-shelf modeling applications and client specific solutions for counterparty credit scoring to fit every client's risk management and budgetary requirements. We have also reviewed, evaluated and implemented outside vendor scoring and credit reporting systems and have established scoring models within these third party applications. Our standard credit scoring model is a turnkey solution and provides individualized scorecards for different types of counterparties. The credit scoring model is designed to be user friendly and can be easily modified to meet your company's specific needs.

Model validation: Our scoring model has a decade track record and is back-tested and re-validated annually. Each year RMG Financial provides each client with a written analysis of the testing results.

Transparency: Unlike other vendors our scoring model is completely transparent – we disclose all ratios, weightings, scoring vectors and formulas used.

Credit Scores

Our model allows the user to calculate point-in-time credit scores and implied credit ratings (as S&P letter grade equivalents) for multiple quarter or year-ends.

Individual scorecards have been developed for each separate company type scored, including:

• Financial institutions
• Investor owned utilities
• Merchant energy companies
• Gas and oil producers
• Natural gas pipelines
• Wholesale energy traders
• Power cooperatives
• Municipal utilities
• Corporate industrials

Financial data can be downloaded from:

• Investortools' ECM data base
• Thomson Reuters
• Bloomberg

Model scores are based on:

• Financial Data (on an unadjusted or adjusted basis with users posting standard adjustments)
• Credit Ratings (ratings agency ratings, bond spreads, EDF's, other user defined data)
• Qualitative Factors

Credit Limit Estimation

The model also comes pre-set with several methods to calculate credit limits. Credit limits can be based on the model's credit score and percentage of tangible net worth, working capital, cash flow or other factors, or based on a user definable credit limit matrix.

Companies who use our credit scoring model include:

We look forward to hearing from you.  Please contact us today for more information, pricing or to set up a demonstration of the RMG Financial credit scoring model.