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15 Nov 2001
MOODY'S LOWERS THE DEBT RATINGS OF PACIFICORP (SR. SECURED DEBT TO A3 FROM A2) AND REMOVES THE RATINGS FROM REVIEW FOR FURTHER DOWNGRADE.
Rating Outlook Remains Negative.
New York, November 15, 2001 -- Moody's Investors Service today lowered the ratings on debt securities
of PacifiCorp (senior secured debt to A3 from A2) and removed the securities
from review for further downgrade, where they were placed on May
18, 2001. The rating outlook for PacifiCorp's long-term
debt securities is negative.
The rating action reflects the weaker financial condition at PacifiCorp
caused, in large part, by above market purchase power costs
incurred by PacifiCorp which surfaced from a very volatile wholesale power
market in the west. Adding to the weaker financial condition has
been the costs incurred earlier in the year for the Hunter plant outage
and the ongoing challenges for PacifiCorp in securing timely regulatory
support for cash recovery of these items. While Moody's believes
that the state regulators will reasonably support PacifiCorp in its numerous
deferred rate and general rate case filings, the rating action today
also acknowledges the expected impact to future cash flows and debt proctection
measures due, in part, to the timeframe associated with final
resolution of these filings.
Moody's action considers the continuing efforts by management to refocus
the company on its core utility business through improved operations and
notes a number of initiatives implemented by the company that will improve
the supply position for the company and for the region. These initiatives
include the May 2001 restart of its 430-MW Hunter plant in Utah,
which had been idle since November 2000, the completion of a 484-MW
natural-gas fired cogeneration facility at Klamath Falls,
Oregon, of which a portion of the output is contracted to PacifiCorp
Power Marketing, and the development of additional natural gas and
renewable generating resources, which should come on-line
over the next few years.
While the successful completion of these efforts will reduce PacifiCorp's
future reliance on the wholesale power markets, state regulatory
support for recovery of past and future wholesale power costs remains
critical to PacifiCorp's rating. This is particularly true in Oregon
and Utah, as PacifiCorp derives about 33% and 38%
of its revenues from these two jurisdictions, respectively.
In light of the numerous cases before state commissions concerning this
issue, the uncertainty surrounding the timing and actual outcome
of each regulatory proceeding, and the importance of a reasonable
outcome to the rating, Moody's is maintaining a negative outlook
on the ratings of PacifiCorp's long-term securities.
Ratings lowered and removed from review for possible downgrade include:
· PacifiCorp's senior secured debt and secured pollution control
bonds to A3 from A2;
· PacifiCorp's senior unsecured debt and issuer rating, both
to Baa1 from A3;
· PacifiCorp Capital I & II trust preferreds to Baa2 from Baa1;
· PacifiCorp's preferred stock to Baa3 from Baa2;
· Global shelf registration for secured, unsecured,
trust preferred and preferred securities to (P)A3, (P)Baa1,
(P)Baa2, and (P)Baa3, respectively.
· PacifiCorp's short-term ratings for commercial paper and
variable rate demand bonds are also lowered to Prime-2 from Prime-1
and to VMIG-2 from VMIG-1, respectively.
In conjunction with this rating action, Moody's has assigned an
A3 senior secured rating to PacifiCorp's planned issuance of First Mortgage
Bonds. Proceeds from the financing will be used for working capital,
including the repayment of short-term debt and intercompany debt
incurred during the past year to finance power procurement related expenditures.
PacifiCorp is a vertically integrated utility headquartered in Portland,
Oregon. PacifiCorp is 100% owned by Scottish Power plc,
a diversified energy company whose issuer rating is Baa1.
Susan D. Abbott
Moody's Investors Service
VP - Sr. Credit Officer
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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