MOODY'S CONFIRMS THE SECURITY RATINGS FOR MIDAMERICAN ENERGY COMPANY AND MIDAMERICAN FUNDING AND CHANGES THE OUTLOOK FOR MIDAMERICAN ENERGY COMPANY TO STABLE FROM POSITIVE
Moody's Investors Service has confirmed the security ratings for MidAmerican Energy Company (MidAmerican Energy or MEC) and MidAmerican Funding, LLC (MidAmerican Funding or Funding) and changed the ratings outlook for MidAmerican Energy to stable from positive. The ratings outlook for MidAmerican Funding remains stable.
The A2 senior secured rating reflects the company's low cost competitive position, the quality of cash flows from its regulated electric and natural gas utility operations, and the supportive regulation in Iowa including the recent favorable electric rate settlement that provides rate certainty through 2005. However, the rating is constrained by MEC's nuclear exposure, the risks associated with its non-regulated activities and the environmental exposure associated with its coal-fired facilities. The Baa1 senior unsecured rating for MidAmerican Funding reflects its structural subordination to MidAmerican Energy's cash flow, the ongoing consistent level of dividends expected from MidAmerican Energy, the existence of a dividend restriction test in MidAmerican Funding's indenture limiting those dividends to be upstreamed to MidAmerican Energy Holdings Company, and the reasonably strong consolidated coverage and capitalization ratios.
Moody's has changed the outlook for MidAmerican Energy to stable from positive as a result of the company's announced construction program of $370 million for a 540 megawatt natural gas fired plant to be completed in 2005 and an additional $1.4 billion for a 900 megawatt coal fired generation plant in Iowa which will be partially owned and is expected to be completed by 2008. The construction program is a direct response to the Iowa Legislature's enactment of the utility plant-siting bill signed into law by Governor Tom Vilsack designed to encourage construction and development of new electric generation in the state. Positively, the plant siting bill contains provisions which allow for regulatory certainty prior to a final construction decision. Also, MEC continues to project strong coverage ratios in the ensuing years and management has expressed its desire to remain prudent in its financing plans.
Ratings confirmed are:
MidAmerican Energy - A3 rated medium term notes and issuer rating
Baa2 rated cumulative preferred stock
Prime-1 rated commercial paper
Iowa Illinois Gas and Electric Company - A2 rated first mortgage bonds
A3 rated issuer rating and senior unsecured pollution control bonds
Baa2 rated preferred stock
MidWest Power Systems Inc. - A2 rated first mortgage bonds and senior secured pollution control bonds
A3 rated issuer rating and senior unsecured pollution control bonds
Baa2 rated preferred stock
MidAmerican Energy Financing I and MidAmerican Energy Financing II - Baa1 rated preferred stock
MidAmerican Funding LLC - Baa1 rated senior unsecured bonds
MidAmerican Funding LLC and MidAmerican Energy Company are subsidiaries of MidAmerican Energy Holdings Company. MidAmerican Energy is a regulated electric and natural gas utility serving over 1.3 million customers, mainly in Iowa and western Illinois. MidAmerican Funding was formed in 1999 as a financing vehicle for the merger between CalEnergy Company and MidAmerican Energy Holdings Company. MidAmerican Energy Holdings Company, headquartered in Des Moines, Iowa, owns interests in over 10,000 megawatts of diversified power generation facilities in operation, construction, and development, and provides electric service to 4.3 million customers and natural gas service to 0.6 million customers worldwide.
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