Fitch Rates KeySpan Corp. Debt Shelf Registration `A-'.
NEW YORK--(BUSINESS WIRE)--May 17, 2001
KeySpan Corp.'s (KeySpan) newly filed debt shelf registration is rated `A-` by Fitch. The rating applies to senior unsecured debt offerings that are part of a $1.0 billion universal shelf filed with the Securities and Exchange Commission on May 3, 2001. It is anticipated that $400 million of KeySpan notes will be issued in the coming weeks with the proceeds used to pay down a like amount of KeySpan commercial paper. The Rating Outlook is Stable.
Currently, KeySpan has $1.65 billion of `A-` rated notes and approximately $1.0 billion of commercial paper outstanding. The outstanding debt was primarily used to fund the November 2000 acquisitions Eastern Enterprises and EnergyNorth Inc. KeySpan plans to sell certain non-core assets over the next 32 months that no longer fit the company's regional strategy. The current market value of these assets is strong.
In assigning ratings for KeySpan and affiliated companies Fitch considered the company's post-acquisition long-term financing plan and business strategy. A further credit consideration was the structural subordination of KeySpan to the cash flow and debt of its local gas distribution and electric generation subsidiaries. KeySpan relies on these companies as the primary source of its ongoing cash flow. Fitch believes that quantitative credit measures for KeySpan on both a consolidated and parent company standalone basis are consistent with its `A-` rating.
KeySpan is the holding company for several natural gas utilities, including, KeySpan Energy Delivery New York, KeySpan Energy Delivery Long Island, and newly acquired Boston Gas Co., Colonial Gas Co., Essex Gas Co., and EnergyNorth Natural Gas. The combined utility operations have 2.4 million natural gas customers and will generate the majority of future consolidated earnings and cash flows. Core unregulated operations include KeySpan Generation LLC which owns and operates the 4,000 megawatt former fossil-fuel electric generation units of Long Island Lighting Co. (LILCO) and sells power and provides services under long-term contract to `A-' rated Long Island Power Authority. In addition, KeySpan operates the profitable 2,168 megawatt Ravenswood electric plant which supplies 25% of the electric capacity needs of New York City and provides retail energy services to residential and commercial customers throughout the Northeast.
KeySpan's long-term operating focus is directed to its regional downstream customer base. Given the low penetration of natural gas use for space heating on Long Island and in New England there will be a continued emphasis on internal growth of the gas utilities. Electric generation investments, which have been successful to date, are expected to be limited to areas where KeySpan has existing generation or actively sells energy. In addition, the company will continue to expand its unregulated retail energy operations through acquisition and internal growth. However, it should be noted that these operations, including, retail energy marketing, commercial energy management, and heating, air conditioning, and ventilation service and installation have higher business risk than the utilities.
Credit concerns for KeySpan primarily rest in two areas; the future operations of its expanding core non-regulated activities; and the successful execution of its substantial asset divestiture program. However, market fundamentals are strong in all key core and non-core areas and Fitch does not anticipate any significant near term problems.