Fitch Rates Detroit Edison's $250MM Sr. Notes 'A-'.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 assigns an 'A-' rating to Detroit Edison Detroit Edison, founded in 1903, is an investor-owned electric utility which serves most of Southeast Michigan. Its parent company, DTE Energy (NYSE: DTE), provides energy services to a variety of clients beyond Detroit Edison's service area. Company's (DeCo) $250 million issuance of 6.625% senior notes, due June 1, 2036. The Rating Outlook for DeCo is Stable. Proceeds from the sale will be used to repay short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. and for general corporate purposes. The ratings for DeCo reflect the company's stable and predictable cash flows as a regulated electric generation and distribution utility. Additionally, the company has posted improving financial results and credit metrics as a result of a favorable rate order which provided for a $335.8 million base rate increase, a pass-through of fuel, purchased power, and transmission costs beginning in 2006, and the recovery of stranded costs and past environmental spending. Furthermore, the order incorporated provisions that appear to have stemmed customer loss due to Customer Choice migration. Of concern is the recent request by the Michigan Public Service Commission (MPSC MPSC Michigan Public Service Commission MPSC Missouri Public Service Commission MPSC Mississippi Public Service Commission MPSC Maryland Public Service Commission MPSC Maharashtra Public Service Commission MPSC Microsoft Partner Solution Center ) for DeCo to make a rate filing by June of this year showing cause why its rates should not be reduced. In the order, the MPSC referred to cost cuts and the prospect of sales exceeding the estimates upon which the current rates were based. DeCo's ratings currently incorporate a view that the regulatory environment in Michigan is improving and is relatively constructive for utilities. A change in the regulatory climate regulatory climate The extent to which a regulated firm or industry is permitted to earn an adequate return on the stockholders' investment. This term is nearly always used in reference to utilities, which are required to obtain approval for rate changes. would have a negative impact on the credit profiles of utilities operating within the state. DeCo must file its information by June 1, 2006. Staff and intervenor filings are due in August, and an MPSC decision is expected in December. While the utility may be able to withstand some modest level of rate reduction, a larger refund would adversely affect the credit coverages of the company. Additional rating concerns include a large industrial and commercial customer base, and a weakening economic climate in Michigan, in particular the automotive sector, and increased capital expenditures related to environmental compliance costs. However, Fitch expects that DeCo will be able to recover the majority of its environmental spending through rates. DeCo, 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 DTE Energy Company, is a vertically integrated, regulated electric utility that serves approximately 2.1 million customers in southeastern Michigan. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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