Fitch Ratings on March 27 affirmed the ratings of KeySpan Corp. and its subsidiaries Brooklyn Union Gas Co. and KeySpan Gas East Corp., citing a low-risk business profile and base rate increases under the multiyear rate plan.
The rating agency affirmed the long-term issuer default ratings at BBB+ for KeySpan and its subsidiaries. Fitch also affirmed KeySpan's senior unsecured debt ratings at BBB+ and A- for Brooklyn Union Gas and KeySpan Gas East.
Additionally, Fitch revised Brooklyn Union Gas' outlook to stable from negative, expressing confidence in the utility's ability to sustain leverage metrics below the level of 5x funds-from-operations-to-adjusted leverage that would trigger a negative rating.
Brooklyn Union Gas' ratio of funds-from-operations-to-adjusted leverage is expected to range between 4.2x and 4.8x from 2018 to 2021, compared to the low 5x range estimated earlier. The improved financial outlook follows an equity infusion of $350 million by KeySpan in 2017 and approximately $170 million in cash received from Brooklyn Union Gas' sale of its equity ownership stake in Dominion Midstream Partners LP in early 2018.
The outlook for Keyspan and KeySpan Gas East remains stable due to approved base rate increases totaling about $362 million for KeySpan and approximately $159 million for KeySpan Gas East from 2017 to 2019, with new rates that became effective in January 2017.
Meanwhile, Fitch expects Keyspan, a subsidiary of National Grid PLC, to have consolidated capital expenditure on average of nearly $1.7 billion annually from 2018 to 2021, with Brooklyn Union Gas expected to contribute approximately 39% of the total capital spending and KeySpan Gas East to account for about 20%.