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S&P revises outlook on Fortis, subsidiaries on tax reform impact

Lower utility rates and cash flow at U.S. subsidiaries will modestly weaken Fortis Inc.'s financial measures, S&P Global Ratings said in a March 21 research report.

This view prompted the rating agency to revise its outlook on Fortis and some of its subsidiaries, including ITC Holdings Corp., Tucson Electric Power Co., FortisAlberta Inc. and Caribbean Utilities Co. Ltd., to negative from stable. The rating agency affirmed its A- corporate credit ratings on the companies.

"The ITC acquisition in late 2016 removed much of the cushion in Fortis' credit metrics and leaves little room for operational or event risk; including U.S. tax reform," S&P Global Ratings said. "During the next 12-24 months, we forecast the company's credit metrics to be weak, with funds from operations (FFO)-to-debt at about 9.5% in 2018, before improving to about 10.5% by 2019-2020."

S&P Global Ratings is not changing its outlook on the ratings of Fortis subsidiary Central Hudson Gas & Electric Corp.

"The cumulative value of the regulatory protections in place provide a degree of insulation that in our view could allow for CHG&E to be rated up to two notches higher than Fortis," the rating agency said in a separate March 21 note.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here and here.