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Action Items: Moody's sees challenges for midstream sector in 2017

S&P Global Market Intelligence presents a periodic rundown of selected ratings actions on U.S.-based energy companies. The changes, confined to upgrades, downgrades and changes in outlook, are listed by announcement date in reverse chronological order.

Dec. 9

* Moody's lowered American Transmission Co. LLC's issuer rating to A2, with a stable outlook, from the previous rating of A1. The downgrade follows FERC's Sept. 28 ruling that the base rate of return on equity, or ROE, for most transmission-owning members of the Midcontinent Independent System Operator Inc. is unjust and unreasonable and should be reduced to 10.32%.

Dec. 8

* Midstream companies will find it challenging to rein in their escalating leverage as producer customers continue to cut spending, Moody's said in its 2017 industry outlook. The analysts expect EBITDA growth for midstream players to "flatten to less than 5%" amid "scaled-back project initiatives" as debt levels remain significant.

Dec. 5

* S&P Global Ratings downgraded its project rating on Southeast PowerGen LLC to B+ from BB- given reduced margins at the Effingham and Sandersville natural gas-fired power plants in Georgia. The reduction in cash flows has negative implications throughout the financial forecast and raises the debt's refinance risk, the rating agency said.

* Depressed market conditions prompted S&P Global Ratings to downgrade the rating on Eastern Power LLC's first-lien debt instruments to BB- from BB with a stable outlook. Along with the downgrade, S&P also revised its recovery rating on Eastern Power to 3 from 2, reflecting a 50% to 70% recovery expectation if a payment default occurs.

Dec. 1

* Sempra Energy's move to drop its bid for a stake in a Peruvian natural gas pipeline project ensnared in scandal is credit-positive, pointing to a low-risk corporate strategy and eliminating the need for near-term debt to finance the purchase, a Moody's analyst said.

* S&P Global Ratings, citing a potential bankruptcy filing, lowered its rating on FirstEnergy Solutions Corp. and its affiliates to CCC+ from B. The rating agency also removed the FirstEnergy Corp. subsidiary from CreditWatch, where it was placed on Nov. 4 with negative implications.

Nov. 30

* S&P Global Ratings revised its outlook on Panda Liberty LLC to positive from stable and affirmed its B+ senior secured rating but revised the recovery rating to 2 from 1. The recovery rating reflects S&P's expectation of recovery at the lower end of 70% to 90% in the event of a default.

* S&P Global Ratings and Moody's issued stable outlooks to nearly $1.83 billion in debt financing sought by Lightstone Generation LLC, the buyout vehicle formed by Blackstone Group LP and ArcLight Capital Partners LLC to finance the $2.2 billion acquisition of four American Electric Power Co. Inc. power plants.

* The U.S. midstream energy industry should be in good shape under a new Republican administration that is expected to have a more amicable regulatory approach to pipeline development, said a Fitch Ratings analyst who held the rating and outlooks for the sector as stable.

Nov. 28

* S&P Global Ratings raised its project credit rating on Moxie Patriot LLC to BB- from B+ following completion of its combined-cycle, 829-MW Moxie Patriot gas plant. The outlook is stable. The facility is in Lycoming County, Pa., and is intended to capitalize on the Marcellus Shale.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.