Fitch Places Northeast Utilities on Rating Watch Negative.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has placed Northeast Utilities' (NU) 'BBB' senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating on Rating Watch Negative. The Negative Rating Watch relates to the expectation of significantly reduced earnings and dividends from NU's competitive businesses due to failure to procure wholesale power sales contracts Sales Contract Contract between a seller and buyer for the sale of goods, services, or both. in recent New England New England, name applied to the region comprising six states of the NE United States—Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. The region is thought to have been so named by Capt. competitive supply auctions. NU announced yesterday that it had substantially reduced earnings expectations for its competitive businesses in 2005. In particular, NU disclosed that Select Energy (Select) failed to win any of affiliate Connecticut Light & Power Co.'s (CL&P) 2005 standard offer service (SOS SOS, code letters of the international distress signal. The signal is expressed in International Morse code as … — — — … (three dots, three dashes, three dots). ) load (approximately 5000 MW) during a recent competitive auction. Compounding this loss of anticipated load and margin were adverse commodity price movements that affected the value of positions that Select had put in place to serve the CL&P load prior to the announcement of auction results. In total, NU's 2005 net earnings forecast for the competitive business was reduced by approximately $30-$40 million. NU's current ratings incorporate anticipated improved non-regulated business performance and significant dividends from these operations over the next several years to help fund NU's significant utility capital build out. A material reduction in dividends from the competitive businesses considerably increases the company's need for external funding to finance these capital expenditures. Fitch expects to meet with management and review updated plans in the near future. A negative rating action could result if losses at Select are more significant or extended than is currently expected or if NU funds expansion of its utility system without sufficient new equity. A positive rating action could result from a significant reduction in parent level debt or a sustained improvement in Select Energy's profitability. The ratings and Outlooks of NU's regulated utility subsidiaries represent their stand-alone credit profiles and are outlined below. Fitch recently reviewed the ratings of all the regulated utilities and believes they remain in sound financial condition. A one-notch downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. of NU would not necessarily result in a downgrade of the subsidiaries under Fitch's parent and subsidiary notching policy. The ratings of the regulated subsidiaries, which are not included in the Rating Watch action, are as follows: Connecticut Light & Power Company: -- First and refunding mortgage bonds affirmed at 'A-'; -- Unsecured and second-mortgage pollution control bonds affirmed at 'BBB+'; -- Preferred Stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. affirmed at 'BBB'; -- Rating Outlook Stable. Public Service Co. of New Hampshire New Hampshire, one of the New England states of the NE United States. It is bordered by Massachusetts (S), Vermont, with the Connecticut R. forming the boundary (W), the Canadian province of Quebec (NW), and Maine and a short strip of the Atlantic Ocean (E). : -- Senior secured debt affirmed at 'BBB+'; -- Sr. Unsecured debt (indicative) affirmed at 'BBB'; -- Rating Outlook Stable Western Massachusetts Electric Company: -- Senior unsecured pollution control bonds affirmed at 'BBB+'; -- Rating Outlook Stable. |
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