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Moody's upgrades Entergy on merchant business exit moves

Moody's on April 5 upgraded its issuer rating on Entergy Corp. to Baa2 from Baa3 based on the company's continued actions to reduce merchant generation exposure.

The outlook for Entergy is "stable." The rating agency also upgraded the company's senior unsecured rating to Baa2 from Baa3 and commercial paper rating to Prime-2 from Prime-3.

"A waning merchant fleet, cash flow to debt in the mid-teen's percent range, and holding company debt under 25% of consolidated debt now position Entergy in-line with other Baa2 peer utility holding companies," said Ryan Wobbrock, vice president and senior analyst at Moody's.

Entergy's March 31 sale of the James A. FitzPatrick nuclear plant to Exelon Corp. and the settlement with New York State to shut down Indian Point were among the recent developments noted by Moody's as Entergy seeks to exit the merchant business.

Entergy's rating and outlook is supported by a strong list of five vertically-integrated utility units operating in four states. The three largest utilities in Louisiana, Arkansas and Mississippi operate under formula rate making frameworks, which provide predictable regulatory outcomes and stable cash flow, Moody's added.