Fitch Rates Potomac Edison's $175MM First Mortgage Bonds 'BBB'.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 assigned a 'BBB' rating to the expected issuance by the Potomac Edison Company (Potomac Edison) of $175 million of 5.35% first mortgage bonds due 2014 (the bonds). The proceeds of the issuance, together with cash on hand, will be used to fund the redemption of existing first mortgage debt. The bonds will be secured by a first priority lien on substantially all real estate, transmission and distribution systems, and franchises and will rank equally with existing and future senior secured obligations. The Rating Outlook of Potomac Edison is Stable. Potomac Edison's rating reflects its strong stand-alone financial condition and low business risk as a transmission and distribution (T&D) utility in the robust Pennsylvania-New Jersey-Maryland (PJM PJM Pacific Journal of Mathematics PJM Project Manager PJM Puerto Jimenez, Costa Rica (Airport code) PJM Pennsylvania New Jersey Maryland Interconnection LLC (Mid-Atlantic region power pool) ) market. While Potomac currently sources all of its energy requirements under a contract with an affiliate, its location within the western PJM market provides ample future power procurement opportunities. Ratings of Potomac Edison are constrained by the rating of its parent company, Allegheny Energy, Inc. (AYE, senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rated 'BB-'). Potomac Edison's credit ratios are strong relative to 'BBB' T&D utility target ratios. The ratios of recurring EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become to interest expense and cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses to interest expense were approximately 3.9 times (x) and 3.6x, respectively, for the 12 months ended Sept. 30, 2004. Credit concerns include: the risk that its state regulators in Maryland, Virginia, and West Virginia may extend current rate caps beyond the current transition periods at levels that do not provide sufficient margins; power supplier concentration risk with its affiliate, AE Supply; as well as potential pressure to increase upstream dividends to its parent company, AYE. Potomac Edison is an electric T&D company operating in Maryland, Virginia, and West Virginia under the Allegheny Power name. The company serves approximately 436,000 electric customers. Potomac Edison is 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 Allegheny Energy, Inc., which is a registered public utility holding company with significant subsidiaries consisting of regulated utilities and an unregulated generation and marketing business. |
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