MONTANA POWER $210 MILLION SHELF DEBT RATED
MONTANA POWER $210 MILLION SHELF DEBT RATED BBB+' BY FITCH
-- FITCH FINANCIAL WIRE --
NEW YORK, Nov. 19 /PRNewswire/ -- Montana Power Co.'s (MPC) new $210 million shelf debt registration is rated "BBB+" by Fitch. The company's outstanding $235 million "BBB+" first mortgage bonds, $18.5 million "BBB" sinking fund debentures, $123 million "BBB" medium term notes, $57.2 million "BBB" preferred stock, and "F-2" commercial paper are affirmed. No commercial paper was outstanding at June 30.
The inability of MPC's utility operations to earn their allowed return on equity continues to hamper consolidated earnings. In addition, Entech, a non-regulated natural resource subsidiary, should continue to provide almost 50 percent of consolidated earnings, maintaining MPC's significant reliance on somewhat riskier non-regulated income.
Utility operations accounted for 51 percent of net income in 1990 but earned only about 9 percent on average equity. Although MPC's credit trend is improving, aided by rate relief granted in June, return on equity will remain well below its allowed 12.1 percent. Continued responsive regulatory treatment is necessary to boost returns to reasonable levels.
The company has manageable construction and external funding requirements and enjoys continued strong contributions from non- regulated operations. In addition, the ratings reflect MPC's low-cost electric utility operations, minimal acid rain exposure, and no nuclear involvement. Although cash flow continues to be adversely affected by less than full recovery of Colstrip 4 lease obligations, cash shortfalls are expected to be minimal by 1992, when contract price escalations take effect.
Including Colstrip 4 lease obligations, total debt leverage at the utility is aggressive at 58 percent of total capitalization. However, such debt leverage falls to 54 percent when adjusted for life-of-lease power sales to other utilities.
/CONTACT: Ed King of Fitch, 212-908-0574/
(MTP) CO: Montana Power Co. ST: Montana IN: UTI SU: RTG SH -- NY072 -- 5051 11/19/91 15:01 EST