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IOWA ELECTRIC POWER & LIGHT 'A' FIRST MORTGAGE BONDS AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, July 29 /PRNewswire/ -- Iowa Electric Light & Power Co.'s (IEL) $279.2 million `A' first mortgage bonds are affirmed by Fitch. The company's $18.3 million outstanding preferred stock is rated `A'. The credit trend is improving.
 The ratings reflect Fitch's expectation that IEL will merge with its affiliate, Iowa Southern Utilities Co. (ISU), by early 1994 at the latest. Credit quality of the combined company would support an `A' rating. On a stand alone basis, IEL's bondholder protection measures are currently weak for the rating category, but are improving. Interest coverage and capital ratios should benefit from the April 30 termination of an expensive purchase power contract, assuming no offsetting reduction in customer rates, and from recently implemented rate increases. Other positive factors include IEL's continued focus on operating costs, $40 million new common equity injected by the parent, conservative dividend payout, and sustained economic development around Cedar Rapids.
 On June 3, IEL submitted its Application for Reorganization with the Iowa Utility Board (IUB) in which IEL seeks to merge with ISU. Since both ISU and IEL are wholly owned subsidiaries of IES Industries, expedited regulatory approval is likely. IEL expects that merger savings will reduce its future consolidated revenue requirement by 3 percent and plans to pass all savings to the ratepayer.
 At 7.6 cents per kilowatt-hour, IEL has the highest rates in Iowa while ISU's rates are the cheapest, averaging 4.10 cents. Fitch expects that by 1995 the merged companies will begin to seek regulatory approval to combine existing customer rate schedules into one uniform tariff. This petition could lead to a substantial increase in ISU's residential and commercial rates to cover IEL's higher nuclear operating costs and keep industrial electric rates competitive. Fitch expects vigorous opposition from some consumer groups to the effort to consolidate the electric base rates.
 IEL's upside potential is limited by relatively high rates, nuclear operations and the customer profile which was altered at the beginning of 1993 through IEL's acquisition of the Iowa service territory of Union Electric Co. (UE). The former UE customers are primarily industrial and represent about $50 million in low margin revenue. As the electric utility marketplace becomes increasingly price competitive, IE will be challenged to retain operating profitability due to its increased business with industrial customers. Further, although the current midwestern flooding should have no material adverse impact on IEL's 1993 sales, expenses or utility plant, it is possible that flood concerns may derail the established pattern of healthy economic development around Cedar Rapids.
 -0- 7/29/93
 /CONTACT: John Watt of Fitch, 212-908-0523/


CO: Iowa Electric Light & Power Co. ST: Iowa IN: UTI SU: RTG

WB-MG -- NY125 -- 7463 07/29/93 17:31 EDT
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Publication:PR Newswire
Date:Jul 29, 1993
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