Fitch Rates Energy East $250MM Notes Reopening.NEW YORK -- Fitch assigns a rating of 'BBB' to Energy East's $250 million reopening of its 6.75% July 15, 2036 notes. Combined with the original July 24, 2006 issuance of $250 million, the total size of the notes is now $500 million. The Rating Outlook is Stable. Proceeds from the reopening will be used to redeem $232 million of the company's 5.75% Notes due November 15, 2006 and for general corporate purposes. The ratings of Energy East reflect the relatively low business risk profile of its six utility subsidiaries and adequate credit measures for the rating category. For the 12 months ended June 30, 2006, consolidated funds from operation (FFO FFO See: Funds from operations ) to interest and debt to 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 primary credit concerns include commodity price risk at Rochester Gas and Electric (RG&E) and New York State Electric and Gas (NYSEG NYSEG New York State Electric & Gas (utility) ) and regulatory uncertainty around NYSEG's current rate proceeding. The commodity price risk is a result of the fixed price delivery option (FPO (For Position Only) A low-resolution image used to mark the placement of the final image. During the draft stages of a publication, FPOs are often used instead of the high-resolution images, which take up a significant amount of storage. ) available to customers of the two utilities. Customers who choose the FPO are charged a fixed price for delivery and supply services while the utilities provide and manage the commodity price risk. If left unhedged, the FPO exposes NYSEG and RG&E to the risk of margin compression from having fixed revenues and variable costs. Both utilities mitigate this risk by fully hedging the FPO load through a mix of non-utility generator contracts, futures and contracts for differences. NYSEG filed a six-year Electric Rate Extension Plan in September 2005 seeking a $58 million increase in delivery rates and 11% return on equity (ROE) among other items. On June 2006, the administrative law judge administrative law judge n. a professional hearing officer who works for the government to preside over hearings and appeals involving governmental agencies. They are generally experienced in the particular subject matter of the agency involved or of several agencies. (ALJ) overseeing the rate proceeding recommended a one-year rate order that would cut delivery rates by $37 million, establish a 9.3% ROE and change the default choice for customers who do not make a supply election to a variable price option (VPO) from the current FPO. On June 29, 2006 NYSEG filed briefs objecting to certain aspects of the ALJ's recommendations; a final order is expected in August 2006. Energy East is a utility holding company primarily involved in the delivery of electricity and natural gas. The company's regulated electricity operations involve the transmission, distribution and generation of electricity in upstate New York Upstate New York is the region of New York State north of the core of the New York metropolitan area. It has a population of 7,121,911 out of New York State's total 18,976,457. Were it an independent state, it would be ranked 13th by population. and Maine. Its regulated gas operations involve transportation, storage and distribution operations in upstate New York, Connecticut, Maine and Massachusetts. The company serves 1.9 million electricity customers and 950,000 natural gas customers. 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. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion