1375814--10/14/2008--MxEnergy_Holdings

related topics

{debt, indebtedness, cash}

{capital, credit, financial}

{condition, economic, financial}

{operation, natural, condition}

{personnel, key, retain}

{financial, litigation, operation}

{competitive, industry, competition}

{gas, price, oil}

{regulation, government, change}

{system, service, information}

{loss, insurance, financial}

{interest, director, officer}

Risks related to our business Our risk management policies and hedging procedures may not mitigate risk as planned, and we may fail to fully or effectively hedge our commodity supply and price risk exposure against changes in market rates or consumption volumes. Actual customer attrition may exceed expected attrition, which could result in a cost to cover for previously purchased fixed price hedges and physical supplies. Most of our financial swap agreements are settled against published index prices which could cease to be reliable or could become unavailable. The accounting method utilized for our hedging activities results in volatility in our quarterly and annual financial results. We may not have sufficient liquidity or credit capacity to hedge market risks, to continue to grow our business, or to operate effectively. Despite our efforts to hedge risk and accurately forecast demand, our financial results are susceptible to changing weather conditions and commodity price fluctuations and therefore will fluctuate on a seasonal and quarterly basis. We are subject to direct credit risk for certain customers who may fail to pay their bills as they become due. We are subject to credit, operational and financial risks related to certain LDCs that provide billing services and guarantee the customer receivables for their market. We depend on the accuracy of data in our billing systems. Inaccurate data could have a negative impact on our results of operations, financial condition, cash flows and reputation with customers and/or regulators. We depend on local transportation and transmission facilities of third parties to supply our customers. Our financial results may be harmed if transportation and transmission availability is limited or unreliable. We are subject to competition in each of the markets that we serve. We depend on continued state and federal regulation to permit us to operate in deregulated segments of the electric and gas industries. If competitive restructuring of the electric or gas utility industries are altered, reversed, discontinued or delayed, our business prospects and financial results could be materially adversely affected. We may not be able to manage our growth successfully, which could strain our liquidity and other resources and lead to poor customer satisfaction with our services. Our success depends on key members of our management, the loss of whom could disrupt our business operations. We rely on a capable, well-trained workforce to operate effectively. Retention of employees with strong industry or operational knowledge is essential to our ongoing success. We are susceptible to downturns in general economic conditions, which could have a material adverse affect on our business, results of operations and financial condition. The successes, failures or activities of various LDCs and other retail marketers within the markets that we serve may impact the perception of the Company. We are subject to regulatory scrutiny in all of our markets. Failure to follow prescribed regulatory guidelines could result in customer complaints and regulatory sanctions. We expend extensive resources to convert, improve and maintain our information systems. Failure to successfully do so may result in a negative impact on our results of operations, financial condition, cash flow and reputation with our customers and/or regulators. Our operations in Houston, Texas and the communities where our customers and employees live along the southeast coast of Texas are vulnerable to hurricanes in the Gulf of Mexico. Our reliance on the electrical power generation and transmission infrastructure within the United States and Canada makes us vulnerable to large scale power blackouts. Risks related to Liquidity, Indebtedness and Capital We may need to raise additional debt or letter of credit capacity to fund growth or operations, which may not be available to us on favorable terms or at all. Our business growth over the past two fiscal years has been funded by significant debt obligations, particularly our obligations under the Senior Notes. Any material adverse financial events or trends could adversely affect our financial health and prevent us from fulfilling our debt obligations. We will require a significant amount of cash to service our debt obligations. Our ability to generate sufficient cash to service debt depends on the ability of our primary operating subsidiaries to generate adequate cash flow. Our interest expense would increase if interest rates increase which would have a negative impact on our financial performance. Our substantial debt obligations could adversely affect our financial health and prevent us from fulfilling such obligations, including our obligations under the Senior Notes, and we might have difficulty obtaining more financing. Our funding for future growth may depend upon obtaining new financing, which may be difficult to obtain given prevalent economic conditions and our credit ratings. The agreement pursuant to which Holdings issued preferred stock contains redemption provisions, which are subject to various triggering events and/or dates. If Holdings is required to redeem the preferred stock, we may have to seek additional debt financing. We are currently considering options for renewing, extending or replacing the Revolving Credit Facility and the Hedge Facility. The current credit market environment and our current credit ratings may hamper our ability to negotiate renewals, extensions or replacements for these facilities on terms acceptable to us or at all.

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1375814--10/14/2008--MxEnergy_Holdings_Inc