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Debt offerings drive ratings actions by S&P, Moody's for US utilities in 2019

During 2019, S&P Global Ratings upgraded long-term credit ratings for 20 U.S. power companies and downgraded 15, while Moody's upgraded the ratings for 12 companies and downgraded 15, as the sector returned to a heavier reliance on debt to raise capital after a significant boost in equity issuances in 2018, according to data compiled by S&P Global Market Intelligence.

Fitch Ratings, which also provides credit ratings of corporate debt issuers, is not tracked by S&P Global Market Intelligence for the U.S. power sector.

Alabama Power Co., Baltimore Gas and Electric Co., Central Maine Power Co., Evergy Metro, Inc. and Florida Power & Light Co. saw their ratings upgraded to A from A- by S&P Global Ratings. Meanwhile, Connecticut Light and Power Co., NSTAR Electric Co. and Public Service Co. of New Hampshire were downgraded to A from A+.

"Companies are strategically managing their cash flow measures closer to the downgrade threshold with minimum cushion at the current rating level," S&P Global Ratings analyst Gabe Grosberg wrote in a Nov. 7, 2019, report. "An unexpected event such as a recession, wildfire, gas explosion, large project delay or political interference could all lead to a negative outlook or a downgrade."

NSTAR Electric was the top-rated utility by Moody's with a rating of A1, an upgrade from A2 in June 2019. NSTAR was followed by nine utilities with ratings of A3, four of which reflect downgrades.

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PG&E Corp. and its utility subsidiary, Pacific Gas and Electric Co., were the bottom-rated utilities. In January 2019, S&P Global Ratings took its issuer credit rating on PG&E Corp. down three notches from CC to D and also lowered its senior unsecured debt rating for PG&E from CC to D, following their filing for Chapter 11 bankruptcy protection. Moody's cut PG&E Corp.'s probability of default rating to D-PD from Ca-PD on Jan. 29, 2019.

Four of the five independent power producers on the list received ratings upgrades in 2019. S&P Global Ratings upgraded Exelon Corp. subsidiary Exelon Generation Co. LLC to BBB+ from BBB and raised its rating for Atlantic Power Corp. to BB- from B+. Moody's raised its corporate family ratings for both NRG Energy Inc. and Vistra Energy Corp. to Ba1 from Ba2, with positive outlooks.

During the year, the two rating agencies initiated coverage of five companies. S&P Global Ratings initiated coverage of Gulf Power Co. at A, AEP Generating Co. at A- and Southern Indiana Gas and Electric Co. at BBB+, all with a stable outlook. Moody's initiated coverage of Southern Indiana Gas and Electric at A3 and Talen Energy Supply LLC at B2, both with stable outlooks.

In November 2019, Moody's raised its outlook on the U.S. utilities sector to stable from negative, while S&P Global Ratings assessed the sector as stable but with a rising percentage of negative outlooks. The utilities will need to monitor their capital investment plans and reevaluate the role of fossil fuels to ensure future growth, the agencies said.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.