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FITCH AFFIRMS COLUMBUS SOUTHERN POWER DEBT, PREFERRED ON ALERT NEGATIVE -- FITCH FINANCIAL WIRE --

FITCH AFFIRMS COLUMBUS SOUTHERN POWER DEBT, PREFERRED ON ALERT NEGATIVE
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Sept. 24 /PRNewswire/ -- Columbus Southern Power Co.'s (CSP) outstanding "BBB" first mortgage bonds and "F-2" commercial paper are affirmed by Fitch. The company's "BBB-" cumulative preferred stock remains on FitchAlert with negative implications, where it was originally placed on July 31. The credit trend for the company is improving.
 The ratings reflect expectations of modest financial improvement following a relatively unfavorable rate order received in May 1992 and the financial support supplied by CSP's status as a wholly owned subsidiary of American Electric Power Co. (AEP).
 The rate order differed significantly from the commission staff's recommendation and will prolong CSP's efforts to improve its currently weak financial condition which limits CSP's ability to issue new debt. Consequently, the company will rely heavily on short-term borrowings in 1993 while new revenues are phased in.
 Still, as an AEP member company, CSP benefits from possible equity infusions from its parent and from access to power generating reserves developed and operated by affiliated AEP companies.
 The cumulative preferred stock will remain on FitchAlert until all appeals of the May 1992 rate order are resolved or until retained earnings exceed any potential writeoff resulting from the rate order. The rate order allowed CSP to raise rates by $128 million pursuant to a 3 year phase-in, the company's first general rate increase since 1983, but disallowed Zimmer costs totaling $150 million after tax. The Zimmer rate treatment could require a writeoff that would wipe out retained earnings and preclude CSP from paying common or preferred dividends. CSP has appealed the commission's order to the Ohio Supreme Court with particular objections to the rate phase-in and the disallowance. The appeal is expected to remain unresolved until late 1993, at the earliest.
 Prospectively, CSP will need to improve earnings to restore its ability to issue first mortgage bonds on the basis of indenture interest coverage tests. CSP will need to file for new rates to cover higher purchased power costs resulting from substantial affiliate spending (primarily Ohio Power Co.) on Clean Air programs.
 Regardless of the results of the rate appeal, CSP's operating earnings will gradually improve over the next 24 months as cash revenues ordered under the rate phase-in substitute for allowance for funds used during construction and deferred revenues. Interest coverage will improve modestly and, assuming new equity from AEP, the capital structure will be stable.
 -0- 9/24/92
 /CONTACT: John Watt of Fitch, 212-908-0523/ CO: Columbus Southern Power Co. ST: Ohio IN: UTI SU: RTG


TS -- NY044 -- 3113 09/24/92 12:45 EDT
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Publication:PR Newswire
Date:Sep 24, 1992
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