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Rating Action:

MOODY'S RATES ALLEGHENY ENERGY DEBT A3; PLACES PARENT P-1 COMMERCIAL PAPER UNDER REVIEW FOR POSSIBLE DOWNGRADE

31 Jul 2000
MOODY'S RATES ALLEGHENY ENERGY DEBT A3; PLACES PARENT P-1 COMMERCIAL PAPER UNDER REVIEW FOR POSSIBLE DOWNGRADE

Approximately $300 Million of Debt Securities Affected

New York, July 31, 2000 -- Moody's Investors Service assigned an A3 senior unsecured rating to Allegheny Energy, Inc.'s debentures, a new long-term rating for this issuer. Allegheny expects to issue up to $300 million in unsecured debt. The outlook is stable.

Moody's also announced that it placed the Allegheny Energy, Inc. P-1 commercial paper rating under review for possible downgrade. The money pool and commercial paper program to date have been used primarily by Allegheny's three regulated utilities. However, Allegheny has requested Securities and Exchange Commission approval to include its Allegheny Energy Supply subsidiary (Baa1 issuer rating) as a user of the money pool and to allow Allegheny Energy, Inc. to borrow up to $300 million in commercial paper with the ability to downstream the funds to AE Supply. Even if the SEC approves the request shortly, Allegheny must still seek approval from each of the five states its utilities serve before the change would occur. So the Allegheny Energy, Inc. commercial paper rating is likely to remain at P-1 for at least a short while. The utilities' commercial paper ratings remain at P-1 and are not under review. Each utility borrows in its own name.

The A3 long-term rating is based upon the average ratings of the four operating subsidiaries. Allegheny owns three regulated utilities and one unregulated electric generation and energy trading subsidiary (AE Supply). The three regulated utilities, West Penn Power, Potomac Edison, and Monongahela Power, have primary ratings of A1. Allegheny itself has only minimal debt at the parent level. Therefore the A3 senior unsecured rating is one notch lower - because of structural subordination - than the average for all the operating companies. The utilities' good cash flow is expected to support improvement in their financial profiles, which have been or are being weakened during the transfer of jurisdictional shares of generating assets as each state grants customer choice of electric supplier. AE Supply, the new owner of the generating assets as they are transferred, should benefit from their low cost. Moody's assigned AE Supply's Baa1 issuer rating earlier this year.

Allegheny Energy, Inc. is an electric holding company headquartered in Hagerstown, Maryland. Its four operating subsidiaries are based in Greensburg, Ohio.

New York
Susan D. Abbott
Managing Director
Corporate Finance
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

New York
Emily J. Eisenlohr
Vice President - Sr Credit Offic
Corporate Finance
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

No Related Data.
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