Printer Friendly

OHIO POWER SENIOR DEBT LOWERED TO 'A-' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, March 1 /PRNewswire/ -- Ohio Power Co.'s (OP) first mortgage bonds are lowered to 'A-' from 'A' by Fitch. Its sinking fund debentures are lowered to 'BBB+' from 'A-' and cumulative preferred stock to 'BBB+' from 'A-'. The company's 'F-1' commercial paper rating is affirmed. The credit trend is declining.
 The ratings reflect the beginning of a critical financial and operating transition to comply by 1995 with Phase I of the Clean Air Act (CAA). Presently, OP is a low-cost producer of electricity and Fitch expects the company to remain relatively low cost, competitive, and resilient to market forces despite CAA costs, primarily attributed to scrubbers at the 2,600 megawatt Gavin plant. The rating recognizes the financial strain associated with the impending approximately $815 million Gavin operating lease which Fitch considers equivalent to funded debt.
 In the 1993-1994 period, OP should maintain a stable financial posture adequate for the new rating category. Pretax interest coverage excluding AFUDC will approach 3.0 times(x) while total equity, including perpetual preferred stock, comprises 51 percent of expected capitalization. In this short term, internal cash generation will decline to the 75 percent range.
 However, by 1995, OP is expected to be financially weak for the 'A-' category. Leverage, adjusted for the Gavin lease, will increase to 57 percent. OP will require significant and timely new rates to cover the $70 million annual Gavin rentals plus the scrubber operating expense. With full cost of service rate making, the level of earnings will be preserved, but pretax coverage erodes to about 2.5x. At present, Fitch expects OP's internal cash generation to turn strongly positive following 1995.
 The 'F-1' commercial paper rating recognizes the stable near-term outlook and the moderate levels of commercial paper usage and short-term bank borrowings. These will be totally paid down with proceeds of new first mortgage bonds scheduled for 1994. The rating anticipates that the parent, AEP, will address the aggressive leverage prior to 1995 by injecting substantial common equity while also increasing OP's retained earnings.
 OP is now implementing its responses to critical business challenges including a soft wholesale power market, high-cost coal mining operations, and financial stress related to the CAA mandates during and after construction. OP appears to have achieved significant regulatory progress with regard to eliminating unrecovered coal costs and creating a framework to finance the partial closure of expensive coal mining operations. Fitch will closely consider the extent of future regulatory support as new rates are required to cover escalating costs.
 OP's long-term downside risks are limited by numerous factors. The company is large with stable, high quality earnings. OP is nuclear free and will remain a low cost producer positioned well for a deregulating market arena. OP has no new capacity coming on line and uses the vast AEP system to market its abundant low cost energy. Finally, OP will benefit when the wholesale market conditions change and kilowatt volume and pricing rebound.
 -0- 3/1/93
 /CONTACT: John Watt of Fitch, 212-908-0523/


CO: Ohio Power Co. ST: Ohio IN: UTI SU: RTG

SH -- NY071 -- 1451 03/01/93 13:18 EST
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Mar 1, 1993
Words:521
Previous Article:DIGIBOARD ANNOUNCES PC IMAC PROVIDES HIGH-SPEED, REMOTE ACCESS TO LOCAL AREA NETWORKS
Next Article:OS/2 TECHNICAL INTERCHANGE CONFERENCE SOLD OUT; IBM SETS OS/2 AND LAN SYSTEMS CONFERENCE FOR AUG. 29-SEPT. 2 IN ORLANDO
Topics:


Related Articles
ALLIED-SIGNAL 'A' SENIOR DEBT, 'F-1' COMMERCIAL PAPER AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --
KANSAS P&L SENIOR DEBT RATED 'A-' AFTER MERGER; OFF FITCHALERT --FITCH FINANCIAL WIRE--
KANSAS POWER & LIGHT $50 MILLION 7.58 PERCENT PREFERRED STOCK RATED 'BBB+' -- FITCH FINANCIAL WIRE --
WESTERN RESOURCES $250 MILLION FIRST MORTGAGE BONDS RATED 'A-' BY FITCH -- FITCH FINANCIAL WIRE --
WESTERN RESOURCES $350 MILLION SHELF DEBT RATED 'A-' BY FITCH -- FITCH FINANCIAL WIRE --
MIDWEST POWER SENIOR DEBT 'A', CP 'F-1' BY FITCH AFTER MERGER -- FITCH FINANCIAL WIRE --
CORRECTION TO MIDWEST POWER SENIOR DEBT 'A', CP 'F-1' BY FITCH AFTER MERGER
BANK OF NEW YORK $1 BILLION SHELF RATED 'A' FOR SENIOR DEBT BY FITCH -- FITCH FINANCIAL WIRE --
AMERICAN ELECTRIC POWER'S 'F-2' COMMERCIAL PAPER AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --
Fitch Changes Ratings On $18 Billion Of Preferred Stock -- Fitch Financial Wire --

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters