Research of Default Risk Level of Russian Energy

The liberalization of the electricity market intensifies the competition for investors in the Russian energy market, for which the financial stability of energy companies is an important criterion. The paper presents the mathematical modelling of integrated assessment of the default risk level of Russian energy companies, taking into account their specific characteristics: type of the energy business, form of ownership, and regional specific. The research is based on the industry approach to the diagnostics of default risk level of energy companies. The approach includes the tlogit-model and assessment of the coefficients significance. The complexity of this model is conditioned by the study of external and internal financial and economic indicators, as well as qualitative criteria based on the introduction of tdummy-variables. Four groups of default risk level of Russian energy companies are proposed. The use of mathematical modelling tools increases the accuracy of assessing the financial insolvency of energy companies in comparison with the traditional methods. Therefore, the proposed approach is novel, relevant, and practically significant. Research veracity is confirmed by the practical implementation. We recommend the use of the proposed methodology in assessment of the current state and development strategy of Russian energy companies, as well as by investors and analysts to make financial decisions.

Keywords

energy; energy business; default; probability of default; investments; risk; logit-model; modelling.

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