Entergy Mississippi FMB Rated `BBB+' By Fitch IBCA.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 10, 2000 Fitch IBCA IBCA International Braille Chess Association IBCA Institute of Burial and Cremation Administration IBCA Integrated Business Communications Alliance IBCA International Barbeque Cookers Association IBCA Department of Interior Board of Contract Appeals assigns a `BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +' rating to Entergy Mississippi, Inc.'s (EMI (ElectroMagnetic Interference) An electrical disturbance in a system due to natural phenomena, low-frequency waves from electromechanical devices or high-frequency waves (RFI) from chips and other electronic devices. Allowable limits are governed by the FCC. ) new $120 million 7 3/4 percent issue of first mortgage bonds due Feb. 15, 2003. EMI, a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of the Entergy Corporation, is a vertically integrated electric utility subject to state and federal regulation. The EMI ratings are based on the company's stand-alone credit profile and regulatory environment, but also consider the interrelationships with affiliated companies Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Also refers to companies that are related to each other in some way. Notes: An affiliated company is sometimes referred to as a subsidiary. that result from three system operating agreements. The six Entergy subsidiaries operate their generating fleet under a System Agreement that allocates power and associated costs to each of the retail electric companies. Therefore, to the extent any one entity is unable to meet its obligations it could impact the financial health of the other companies. EMI's Bondholder protection measures declined in 1999, largely due to lower wholesale and retail sales, a May 1999 rate reduction and an accounting change that reduced unbilled revenues. Generating outages negatively impacted wholesale sales. In addition, cash flow in 1999 was adversely impacted by a rate reduction that recognized the completion of the Grand Gulf rate phase-in plan in Sept. 1998. Despite the lower earnings, the equity ratio was essentially unchanged reflecting a substantial reduction in the dividends paid by EMI to its parent, Entergy. Entergy manages the dividends from its operating subsidiaries to maintain a targeted capital structure of roughly 50%. That ratio is likely to increase coincident with a rising capital program for planned improvements to the distribution network. Initially the new bond issue will increase debt leverage to about 55%, but continued management of the dividend and improved earnings in 2000 should restore the capital structure over time to a level that is consistent with the current ratings. For the 12-months ended Sept. 30, 1999, earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
The single factor driving the weaker cash flow is the termination of the aforementioned rate phase-in plan that reduced cash flow by about $100 million. Going forward, EMI's capital program will pressure credit quality measures, however Fitch IBCA expects Entergy to continue to limit dividends from EMI to offset the cash requirements. In 2000, higher affiliated sales and lower purchased power expense should improve earnings (assuming normal weather) and credit quality measures. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion