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S&P affirms Duke Energy Florida negative outlook citing parent's credit risks

S&P Global Ratings on Oct. 16 affirmed ratings for Duke Energy Florida LLC and maintained a negative outlook for the utility.

The negative outlook reflects Ratings' expectation that parent Duke Energy Corp.'s funds from operations-to-debt will fall below the rating agency's 15% downgrade threshold in 2020 and 2021, and that structural protections in place for Duke Energy Florida, or DEF, are not sufficient to insulate the issuer credit rating of the utility from its corporate parent.

"Duke Energy is facing potentially higher coal ash risks, delays in the Atlantic Coast Pipeline (ACP) project, regulatory lag, and robust capital expenditures," Ratings said in an Oct. 16 research update.

The rating agency affirmed Duke Energy Florida's "A-" issuer credit rating, "A-2" short-term rating and the ratings on its senior unsecured debt and first-mortgage bonds.

Ratings expects FFO to debt of 19% to 20% over the next three years. It could lower its ratings on DEF in the next 12 to 24 months if Duke Energy's consolidated financial measures do not "consistently improve," or if Duke Energy's business risk increases due to additional regulatory lag, more stringent environmental rules related to coal exposure or if the company's regulatory risk management in key states weakens.

The agency could revise its outlook to stable for Duke Energy and its subsidiaries, including DEF, if the company improves financial measures to consistently maintain FFO-to-debt above 15%.

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.