Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
06 Dec 2011
New York, December 06, 2011 -- Entergy Corp. (ETR, Baa3 Senior Unsecured, Stable Outlook)
and ITC Holdings Corp. (ITC, Baa2 Senior Unsecured,
Stable Outlook) announced on December 5, 2011 that they have entered
into an agreement under which ETR's utility operating companies
will spin off all of their transmission assets to shareholders and merge
them with ITC, using a tax-efficient Reverse Morris Trust
structure. ETR shareholders will own over 50% of the post-merger
ITC. The value of the transaction, in terms of book value
of assets transferred, is estimated at approximately $3.2
billion, or approximately 13% of ETR's consolidated
net property plant and equipment. Target closing is 2013.
Moody's views the transaction as essentially neutral from a metrics
perspective, but it has the potential to increase regulatory risks
and certain operating risks at ETR and its subsidiaries. We are
maintaining the stable rating outlook for ETR and its utility operating
companies (see list below) at this time.
ETR has stated that its operating subsidiaries would reduce their debt
by approximately $1.7 billion upon closing and that ETR
would reduce parent debt by approximately $100 million, such
that cash flow coverage of debt and interest ratios would remain essentially
unchanged (both on a consolidated basis and at the utility operating companies)
as a result of the transaction after adjusting for the lost transmission
revenues. In addition, ETR would be able to forego substantial
Capex needed on the transmission system and avoid the associated regulatory
lag with such intrastate investments. Currently, the transmission
assets owned by each utility operating company are regulated by the respective
local regulators, and ETR has transmission cost recovery rider only
in Texas. Under ITC, the assets would be regulated by the
Federal Energy Regulatory Commission (FERC), which has forward looking
rate-making, generally higher Allowed ROEs and Incentive
ROEs, and which permits a capital structure with 60% debt,
as opposed to 45-50% for ETR's utility operating companies.
Investments are needed to harden ETR's system along the Gulf coast,
to meet NERC requirements and for system upgrades so that ETR can join
a regional transmission organization (RTO -- ETR has proposed to
The transaction will require a long list of approvals, including
FERC and the public service commissions of Arkansas (AR), Louisiana
(LA), Mississippi (MS), Texas (TX) and New Orleans (NO).
Moody's views the outcome of the state approvals in AR (crucial
due to its geographic position and size) and LA (crucial due to its size)
as the most uncertain. However, the transaction terms would
require the regulator in each jurisdiction to cede control over the transmission
network (including the timing and prioritization of investment projects)
to FERC and to accept incrementally higher costs for ratepayers (the transmission
portion of rates would likely increase due to FERC's more generous
rate-making). In addition, the transaction agreement
would require all of the jurisdictions to accept joining MISO, whereas
SPP (which is based in Little Rock) has been lobbying for Entergy Arkansas
to join SPP. We note that, irrespective of the spin-off,
the same regulators would have to approve ETR's joining an RTO,
and control over transmission would migrate to FERC in that scenario.
One area of potential concern is that ETR's relationships with its
various regulators could be damaged during the approval negotiations,
which will undoubtedly be complex. Whether or not the transaction
is ultimately successful, ETR will have to live with any ill will
that might be created, whereas ITC will not be regulated by these
Another area of concern is the potential impact on future storm recovery.
ITC will acquire a substantial number of ETR's storm response personnel
with the merger. Moody's believes that coordination of any
recovery effort would be more difficult when physically interconnected
transmission and distribution assets are owned by unrelated entities,
especially when those entities are likely to have different priorities
regarding the order for repairing assets and restoring service.
Moody's has observed a general improvement in the regulatory relations
of ETR's utility operating companies after hurricanes Katrina and
Rita, which we believe was caused in part by storm restoration that
was viewed as effective given the difficult circumstances. We believe
that storm recovery that is ineffective or lacking in coordination would
have negative implications for regulatory relations.
Moody's observes that the sale will incrementally reduce the regulated
portion of ETR's business mix. In addition, the asset
mix of the operating utility companies will be marginally weighted toward
higher risk generation and less toward lower risk transmission and distribution.
However, we do not view these changes as material to the business
profile, given reduced expectations of unregulated cash flows from
the northeast nuclear fleet.
In summary, the transaction appears to be neutral to metrics,
but in order to mitigate the potential business risks, we believe
that ETR will need to manage the regulatory approval process carefully
and plan for operating a previously integrated transmission and distribution
system with an unrelated partner, including a storm response protocol.
Entergy Corporation - Baa3 Senior Unsecured, Stable Outlook
Entergy Arkansas, Inc. - Baa2 Senior Unsecured,
Entergy Gulf States Louisiana, LLC - Baa2 Senior Unsecured,
Entergy Louisiana, LLC - Baa2 Senior Unsecured, Stable
Entergy Mississippi, Inc. - Baa3 Senior Unsecured,
Entergy New Orleans, Inc. - Ba2 Senior Unsecured,
Entergy Texas, Inc. - Ba1 Senior Unsecured,
System Energy Resources, Inc. - (P)Ba1 Senior Unsecured,
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
William L. Hess
MD - Utilities
Corporate Finance Group
Entergy's Transmission Spin-Off Is Neutral to Metrics, But Not Without Risks
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY'S CREDIT RATINGS,
ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
MOODY'S CREDIT RATINGS,
ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.