DUFF & PHELPS RATES SOUTHERN CALIFORNIA GAS COMPANY'S $175 MILLION FIRST MORTGAGE BONDS 'A+'
CHICAGO, Nov. 3 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned a rating of "A+" (Single-A-Plus) to Southern California Gas Company's $175 million issue of 6-7/8 percent first mortgage bonds due 2025. The bonds, which are non-callable for 10 years, were sold from an existing shelf registration. Proceeds will be used to redeem higher coupon debt. Southern California Gas (SoCal Gas) has well-managed gas distribution operations and traditionally has maintained a strong, conservative financial profile. Ongoing cost control efforts and refinancing of higher cost debt have benefited SoCal Gas, despite pressures from the weak Southern California economy and competitive markets. Provisions of a recent comprehensive settlement proposal, which would resolve significant regulatory issues, are incorporated in the current rating. On balance, the proposed settlement is viewed positively for its potential to enhance SoCal Gas' competitive position in non-core markets and elimination of hindsight review of gas purchasing decisions. However, SoCal Gas' financial performance, including its ability to earn its allowed rate of return, would become more dependent on successful control of operating expenses, retention of non-core customers, and level of non-core volumes. Debt levels could rise in the near-term to finance the potential restructuring of gas purchase contracts with pipeline affiliates under the settlement. Importantly, the agreement is subject to regulatory approval and other conditions. SoCal Gas is in a favorable gas supply position as gas distributors move forward under the provisions of FERC Order 636. The company has been active in initiating gas purchases directly with suppliers, and has a diverse portfolio of gas supply and transportation arrangements. Restructuring of higher cost gas purchase agreements with affiliates would help to further strengthen the company's competitive position. Company and regulatory actions have been responsive to the increasing competition for SoCal Gas' highly price sensitive non-core customers. Last year, the California Public Utilities Commission approved changes to better reflect the true cost of service to core and non-core customers. California's stringent air quality regulations enhance the position of natural gas as the fuel of choice. Southern California Gas, the primary subsidiary of Pacific Enterprises, is the nation's largest natural gas distribution utility, serving southern and central California. -0- 11/3/93 /CONTACT: Lynda A. Housa of Duff & Phelps Credit Rating Co., 312-368-3156/
CO: Southern California Gas Company ST: California IN: OIL SU: RTG
TW -- NY093 -- 0283 11/03/93 16:04 EST
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|Date:||Nov 3, 1993|
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