Moody's on Oct. 3 upgraded the senior unsecured debt rating of DPL Inc. to Ba1 from Ba2, and the issuer rating of DPL subsidiary Dayton Power and Light Co. to Baa2 from Baa3, both with positive outlook. The rating agency also upgraded the senior secured rating of DP&L to A3 from Baa2.
The upgrade was prompted by the Public Utilities Commission of Ohio's approval of a settlement allowing an increase in DP&L's distribution base rates, and the implementation of revenue decoupling and a distribution investment rider, after the company submitted a rate request in November 2015.
Moody's considers the approved mechanisms credit positive because, "they support the company's timely recovery of capital improvement spend on its distribution system, insulate its cash flows from the effect of the declining load in its service territory, and enhance the stability and predictability of cash flows."
Other factors driving the rating upgrade include DPL's complete transition to a regulated transmission and distribution group, as well as the $233.3 million reduction in consolidated debt during the first half of 2018, including the repayment of $176 million of DPL parent debt, equal to around 19% of the holding company debt.
The positive outlook for the companies reflect Moody's expectations that Ohio regulators will allow DP&L to continue to collect the $105 million distribution modernization rider for additional years through 2022, with DP&L's filing to request a two-year extension due in June 2019.
AES Corp. is the ultimate parent of DPL and DP&L.