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.
01 Mar 2002
MOODY'S UPGRADES THE SECURITIES OF SOUTHERN CALIFORNIA EDISON COMPANY (SENIOR SECURED TO Ba2) FOLLOWING REPAYMENT OF PAST DUE PROCUREMENT RELATED CLAIMS
New York, March 01, 2002 -- Moody's Investors Service today upgraded the long-term debt securities
of Southern California Edison Company (SCE). The rating outlook
for the securities is stable.
Ratings upgraded and removed from review for further upgrade are SCE's
first mortgage bonds, upgraded to Ba2 from B3, its senior
unsecured rating, and issuer rating, upgraded to Ba3 from
Caa2, its junior subordinated debt, upgraded to B2 from Caa3,
its preferred stock, upgraded to B3 from Ca; and a shelf registration
for the issuance of first mortgage bonds, senior unsecured debt,
junior subordinated debt and preferred stock upgraded to (P)Ba2 from (P)B3,
to (P)Ba3 from (P)Caa2, to (P)B2 from (P)Caa3 and to (P)B3 from
(P)Ca, respectively. SCE's short-term ratings of Not
Prime and Speculative Grade are withdrawn.
The rating action reflects financial closure of $1.6 billion
in senior secured credit facilities, proceeds from which,
combined with cash on hand, have been used to repay creditors and
power suppliers past due amounts owed. Additionally, SCE
intends to remarket approximately $196 million of secured tax-exempt
debt on a fixed rate basis. These securities had been previously
repurchased by SCE. Use of funds, which aggregate $5,330
billion, will repay the following creditors and power suppliers:
· $400 million of long-term unsecured debt (1995
and 1996 series);
· $531 million of commercial paper;
· $1,650 million to bank creditors;
· $30 million of payments to QUID holders and preferred
equity holders; and
· $2,719 million to power suppliers.
The rating upgrade reflects the ability of SCE to repay all past due obligations
and to generate sufficient excess cash flow over the next two years to
repay the credit facilities, all procurement related debt,
and other SCE debt and preferred securities that mature in this timeframe.
SCE's prospects for achieving this level of free cash flow have been fortified
by the California Public Utilities Commission (CPUC) January 23rd approval
of the Procurement Related Obligations Account (PROACT) that codifies
the October 5, 2001 settlement of a federal filed rate doctrine
lawsuit between CPUC and SCE.
The settlement agreement enables SCE to recover from ratepayers previously
uncollected power procurement costs. Under the settlement agreement,
SCE retains all cash flow that it collects after satisfying its current
operating cash requirements, making required payments to the California
Department of Water Resources (CDWR) for supplying the "net-short"
energy requirements and making energy and capacity payments to the qualifying
facilities. This excess cash, which will vary each month,
will be used for debt retirement.
ANALYSIS OF PROACT
The settlement agreement states that SCE shall recover in retail electric
rates its procurement related obligations recorded in PROACT by no later
than December 31, 2005. SCE currently predicts that it should
fully collect sufficient cash flow to recover PROACT by the end of 2003.
The settlement agreement also states that the CPUC agrees to maintain
retail electric rates at no less than the current rates through the earlier
of PROACT recovery or December 31, 2003 and further states that
should procurement related obligations recorded in PROACT not be fully
recovered by December 31, 2003, the remaining balance shall
be recovered in rates over a two-year period that ends on December
The establishment of the PROACT account ($3.6 billion) also
helps to repair SCE's balance sheet. Previously, a CPUC order,
issued in March 2001, caused SCE to incur a $2.5 billion
after-tax write-off at year-end 2000, resulting
in SCE's total debt to total capitalization ratio to spike to 85%.
With the January 23rd CPUC approval of PROACT, much of this write-off
was reversed in the company's 2001 year-end statements and as such,
the company's total debt to total capitalization ratio at year-end
2001 was around 62%. Moreover, with SCE applying all
excess cash to the retirement of procurement related debt, SCE's
total debt to total capitalization is expected to decline rapidly during
2002 landing at 52% at year-end 2002 and declining to less
than 40% by year-end 2003.
ANALYSIS OF PROACT CASH FLOWS
While the collection of PROACT cash flows is subordinate to SCE satisfying
its own obligations as well as its obligations to CDWR and the qualifying
facilities, Moody's views the PROACT cash flows to be fairly predictable.
For one, most of the volatility that could reduce the amount of
PROACT cash flows has been either eliminated or reduced by actions taken
by SCE and others. For instance, SCE has entered into five
year contracts with the renewable qualifying facilities at an energy price
of 5.37 cents thereby eliminating the volatility in that component
of their cost structure. SCE has also hedged its exposure to increases
in natural gas prices for the next two years thereby reducing greatly
the volatility around payments to natural gas fired qualifying facilities.
Together, kilowatt-hour (Kwh) purchases from qualifying facilities
represent about one-third of the SCE's generation requirements.
Little volatility in fuel costs is likely to surface from SCE's owned
generation (represents 33% of SCE's total generating requirements),
which includes interests in hydro, nuclear, and coal assets.
The remaining third represents payments that SCE makes to CDWR.
These payments are based upon CDWR's revenue requirement, an amount
that was finalized at a CPUC hearing on February 21, 2002.
With the CDWR revenue requirement established, subsequent changes
to the CDWR revenue requirement should not affect PROACT cash flows,
pursuant to the settlement agreement.
Other vulnerabilities to the timing of the PROACT cash flows include lower
demand for electricity, which would have the effect of reducing
the amount of Kwhs sold by SCE thereby reducing the amount of excess cash
flow. Mitigating this issue is the fact that SCE's electric sales
during 2001 have already declined by 4.5% due to higher
prices and attractive conservation incentives. These conservation
incentives offered by the state have terminated and the company has modeled
relatively flat electric sales for 2002 and 2003 in determining the 2003
timeframe for PROACT recovery. Additionally, the level of
PROACT cash flows could be impacted by a forced outage at one of SCE's
generating plants. Under this scenario, SCE's operating costs
would increase, and SCE would be relying more heavily on wholesale
purchases by CDWR to meet their customer load. While this scenario
is indeed plausible, all of SCE's plants have very strong operating
histories. Lastly, the state contemplates SCE being in the
position to assume power procurement from CDWR beginning in 2003.
While a number of regulatory issues need to be implemented for that to
occur, SCE's exposure to this potential issue is mitigated by the
fact the CDWR has contracted for significant portions of the net short.
Moreover, in all of these cases, SCE has the ability to continue
to collect the remaining amount of PROACT cash flows through 2005 should
the procurement related obligations recorded in PROACT not be fully collected
by year-end 2003.
REGULATORY & MARKET UNCERTAINTIES ARE REFLECTED IN THE RATING
Prospectively, SCE's financial metrics are quite strong for the
Ba2 senior secured rating. Strong predictable cash flows are expected
to materially reduce debt by more than $2.6 billion over
the next two years. Moody's expects SCE's operating cash flow to
cover both interest expense (including payments on subordinated notes)
and lease expense on average by 5.3x annually through 2006,
and expects annual operating cash flow to represent at least 35%
of SCE's total debt. While these metrics could arguably support
a higher rating, the Ba2 senior secured rating incorporates the
challenging and highly volatile regulatory environment and uncertain marketplace
that exists within California.
While the settlement between SCE and CPUC represent the first tangible
step towards helping to fix the energy markets in California, a
number of key market and regulatory issues remain unresolved, many
of which can indirectly affect SCE. For one, the CPUC still
remains an unpredictable regulatory body. Deregulation has effectively
halted in the state and no clear road map exists as to what the California
market place will become. The involvement of CDWR adds another
layer of uncertainty for SCE and other market participants. CDWR's
ability to complete the planned bond offering is an important step towards
continuing to repair the California marketplace but uncertainties still
persist around the timing and the completion of this transaction.
Related to the CDWR financing is the possibility that contracts entered
into by CDWR and generators may be renegotiated, all of which adds
more uncertainty to the outlook for the California marketplace.
Beyond that, Moody's believes that the utilities will be under pressure
to lower rates so that the impact of the CDWR contracts are more manageable
to ratepayers. Also, the CPUC and the utilities need to address
a number of regulatory matters including the establishment of power procurement
procedures, which among other things, insulates the utilities
from changing prices should the utilities return to the power procurement
business as outlined under AB1X. Finally, the outcome of
the Pacific Gas and Electric Company bankruptcy adds another unknown to
LEGAL CHALLENGE BY TURN
Moody's also notes that while SCE's settlement with the CPUC was unanimously
approved by the commission and received broad support from key legislators
including the governor, the attorney general, and the legislature,
one of the consumer groups, TURN, is opposed to the settlement
of this federal lawsuit. TURN has filed an appeal of the Federal
District Court judgment approving the settlement arguing, among
other things, that the CPUC did not have the authority to enter
into the settlement and that TURN's rights had been harmed since they
did not have ample time to respond to the settlement. TURN's efforts
to stay the settlement have not been successful as the appellate judge
denied their stay ruling that the settlement did not result in any irreparable
harm to them. SCE, CPUC, and TURN have each filed their
arguments and the hearing is scheduled for March 4th. The governor
and the legislature have each filed amicus briefs in support of the settlement.
A ruling from the appellate court will likely take months and any ruling
is likely to be appealed. The appellate court could remand the
case back to the District Court. As such, final resolution
of this issue could take years. While legal outcomes are difficult
to predict, Moody's believes that the settlement of the federal
lawsuit will likely stand in its current form given the consensual nature
of the agreement between SCE and the CPUC, the broad support that
it has within the state, and the fact that it represents a first
step towards repairing a broken market in the state.
As mentioned, SCE intends to remarket $196 million of tax-exempt
pollution control bonds previously repurchased by SCE. The bonds,
which have been assigned a Ba2 rating, will be remarketed as four
separate series: $81 million (Series A 1986), $25
million (Series B 1986), $40 million (Series C 1986),
and $50 million (Series D 1986). The bonds will be secured
by a first lien on SCE's plant through the company's first mortgage bond
indenture and will mature on February 28, 2008.
Headquartered in Rosemead, California, SCE is a vertically
integrated utility serving southern California and a wholly-owned
subsidiary of Edison International.
Vice President - Senior Analyst
Moody's Investors Service
Susan D. Abbott
Moody's Investors Service
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.