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Moody's expects to nudge most ratings up a notch for private utilities


From the November 19, 2013 issue of Public Power Daily

Originally published November 19, 2013

By Jeannine Anderson
Editor
Moody's Investors Service placed the ratings of most regulated (private) utilities and utility holding companies in the United States on review for upgrade, affecting approximately $400 billion of debt.

These companies have been placed on review because Moody's "has adopted a generally more favorable view of the relative credit supportiveness of the U.S. regulatory environment, as detailed in our Sept. 23, 2013 Request for Comment: 'Proposed Refinements to the Regulated Utilities Rating Methodology and our Evolving View of US Utility Regulation,'" the credit rating company said Nov. 8.

Moody's cited "improving regulatory trends in the United States, including better cost-recovery provisions, reduced regulatory lag, and generally fair and open relationships between utilities and regulators." 

"We believe that many U.S. regulatory jurisdictions have become more credit supportive of utilities over time and that our assessment of the regulatory environment that has been incorporated into ratings may now be overly conservative," said Moody's Managing Director Larry Hess.

The U.S. utility sector's low number of defaults, high recovery levels, and generally strong financial metrics "provide additional corroboration for our view that ratings should generally be higher," the company said. "We expect that most upgrades will be limited to one notch, and that the reviews of the affected companies will be completed within approximately 90 days." 

Moody's said it anticipates that most of the utilities placed under review will be upgraded, but that there may be selected instances where ratings will not be upgraded, once the credit rating company completes its review. 

"Several regulated utilities and utility holding companies were not placed on review due to issuer-specific circumstances that would preclude an upgrade at this time," Moody's noted. "These exclusions include utilities that are engaged in substantial construction programs for new generation or other large capital projects, currently have a negative outlook or are under potential downward rating pressure, are characterized by material concentration or event risk, face market or regulatory risks specific to their particular jurisdictions, or are part of a corporate family that has significant non-utility operations." 

More information, including the names of more than 100 utilities placed on review for upgrade, is posted on the Moody's website
 

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