Fitch Rates West Penn Power's $145MM 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 assigns a 'BBB+' rating to the $145 million initial issuance of 5.875% first mortgage bonds of West Penn Power Company (West Penn) due Aug. 15, 2016. The bonds rank equally in right of payment with future unsubordinated indebtedness under West Penn's general mortgage indenture dated Aug. 16, 2006. The proceeds from the sale of the bonds will be used to repay indebtedness, pay a dividend to its parent, Allegheny Energy Allegheny Energy (NYSE: AYE) is a traditional public utility based in the Pittsburgh suburb of Greensburg. It services communities in Western Pennsylvania, Western Maryland, Northern West Virginia, Northwest Virginia. Inc., and for general corporate purposes. The bonds are secured by a first priority lien on certain real estate and substantially all of West Penn's transmission and distribution systems and franchises. The Rating Outlook is Stable. E[acute accent]The ratings of West Penn reflect its low business risk as a transmission and distribution (T&D) utility with hedged power supply and generation rate certainty through the end of 2010. The ratings also include Fitch's expectation of increasing leverage and lower coverage ratios due to rising operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and capital expenditures during the period of capped generation and distribution rates. E[acute accent]The Stable Rating Outlook includes Fitch's view that West Penn's financial leverage will increase over the next two years but will remain consistent with the issuer default rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) of 'BBB-'. Fitch forecasts that internal cash flow will not fully cover capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. and upstream dividends during the distribution rate freeze. West Penn agreed to cap distribution rates through 2007, as part of the April 2005 rate settlement. In Fitch's view, the hedging of power costs and generation rate certainty through 2010 reduced the risk of political intervention in utility rate matters and is supportive of credit quality. However, West Penn will be challenged to limit deterioration of credit ratios during the rate cap period through effective control of operating costs. E[acute accent]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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