CORRECTION: MOODY'S RAISES RATINGS OF NORTHEAST UTILITIES AND AFFILIATES (PREFERRED STOCK RATINGS RAISED TO "ba2 FROM "ba3, NOT TO "ba1 FROM "ba3")
New York, January 26, 2001 -- Moody's Investors Service has upgraded the debt ratings of Northeast Utilities (NU), Public Service Company of New Hampshire (PSNH), and its affiliate, North Atlantic Energy Corp. (NAEC). This action is being taken in response to the decision by the Supreme Court of New Hampshire to uphold the state's industry restructuring plan. Additionally, because Moody's believes the implementation of this plan removes the potential of any continuing uncertainty concerning the future of PSNH from the other affiliates of the Northeast Utilities system, the ratings assigned the debt of Connecticut Light & Power Company (CL&P) and Western Massachusetts Electric Company (WMECO) are also being raised. All the ratings in the Northeast Utilities family remain under review for a possible upgrade to reflect the company's strategy to exit the nuclear generation business and the possibility of an acquisition by Consolidated Edison, Inc.
The issues upgraded are:
NU's issuer rating, rated Baa3 from Ba1; senior unsecured debt, rated Baa3 from Ba1;
PSNH's senior secured debt, rated Baa3 from Ba1; its issuer rating to Ba1 from Ba2; preferred stock, rated "ba2" from "ba3":
NAEC's senior secured debt, rated to Baa3 from Ba2;
CL&P's senior secured debt to Baa1 from Baa3, its issuer rating and unsecured debt to Baa2 from Ba1, and its preferred stock ratings to "baa3" from "ba2";
CL&P Capital L.P.'s preferred stock rating to "baa3" from "ba2" and its preferred shelf to (P)"baa3" from (P)"ba2"; and
WMECO's senior secured debt to Baa1 from Baa3; its issuer rating and unsecured debt to Baa2 from Ba1, preferred stock rating to "baa3" from "ba2", and shelf ratings to (P)Baa1/ "baa3" from (P) Baa3/"ba2".
With this decision, PSNH can now implement the provisions of the state's restructuring legislation. We anticipate that the company's plan to issue securitization bonds to recover its stranded costs will proceed expeditiously. As part of its agreement, the company is required to write off up to $450 million in costs that do not qualify for recovery. Within a month of the debt financing, the company is committed to reduce rates by 10%. Over the next few years, the company's financial measures should reflect the volatility associated with the implementation of the restructuring law --- securitization of stranded costs and plant sales. Beyond that time period, however, we anticipate that the focus on improving customer service, expense control, and reduced outages in the remaining transmission and distribution businesses will support a stability of cash flows appropriate for the rating category.
The other rated entities are expected to benefit from the decision also and as a result will reflect an improving credit picture. While we anticipate that CL&P and WMECO will continue to be managed as stand-alone businesses, we believe the removal of the uncertainty surrounding PSNH's financial health should also reduce the concern for the collateral impact that could have spread across the NU system.
Additionally we believe the planned operational improvements at the companies along with the likelihood of continued economic growth position them to sustain cash flow performance at a higher than anticipated level and will permit them to provide for a growing dividend without infringing on their own ability to support outstanding debt. As a result, the credit profile of NU is expected to benefit.
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