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Moody's downgrades Northwest Natural Gas, changes outlook to stable

Moody's on May 17 lowered its ratings on Northwest Natural Gas Co. by one notch, saying the utility's financial performance in the next few years is expected to be in line with companies of the same rating level. The outlook was revised to stable from negative.

The rating agency downgraded the Northwest Natural Holding Co. subsidiary's senior secured shelf and senior secured medium-term note program to (P)A2 from (P)A1; senior unsecured shelf and senior unsecured medium-term note program to (P)Baa1 from (P)A3; and preferred shelf to (P)Baa3 from (P)Baa2.

Northwest Natural Gas also saw its ratings on senior secured first mortgage bonds and senior secured regular bond/debenture lowered to A2 from A1. Moody's affirmed the utility's commercial paper rating at P-2.

Moody's expects the utility's cash flow from operations to be steady in the low $200 million range in spite of enhanced cash flow from two rate orders in Oregon and improved underfunded pension recovery. The utility's debt of $1.1 billion as of March 31 would increase to about $1.3 billion by 2023 when compared against an approximately $175 million base capital expenditure per year, as well as a rising dividend.

These result in ratio levels that are "viewed as more appropriate for low-risk local gas distribution utilities in the Baa-rating category," Moody's said in the release.

Northwest Natural Gas serves about 740,000 natural gas customers in Oregon and southwest Washington.