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Rating Action:

Moody's affirms the rating of Avangrid and six rated subsidiaries, upgrades Central Maine Power, and changes the outlook of Avangrid Renewables Holdings, Inc., Rochester Gas & Electric, Southern Connecticut Gas, and Berkshire Gas Company to positive

26 Apr 2016

Approximately $5 Billion of debt securities affected

Note: On April 19, 2017, the press release was corrected as follows: “Senior Secured Regular Bond/Debenture, Affirmed A2” was removed from the list of affirmations for Rochester Gas & Electric Corporation. Revised release follows.

New York, April 26, 2016 -- Moody's Investors Service, ("Moody's") affirmed the long-term ratings of Avangrid, Inc. (Baa1 Issuer Rating), and its subsidiaries Avangrid Renewables Holdings, Inc. (Baa1 Backed Issuer Rating), New York State Electric and Gas Corporation (A3 Issuer Rating), Rochester Gas & Electric Corporation (Baa1 Issuer Rating), United Illuminating Company (Baa1 Issuer Rating), Southern Connecticut Gas Company (Baa1 Issuer Rating), Connecticut Natural Gas Corporation (A3 Senior Unsecured Rating), and upgraded Central Maine Power Company's issuer rating to A2 from A3. The outlooks of Avangrid Renewables Holdings, Inc., Rochester Gas & Electric, Southern Connecticut Gas, and Berkshire Gas Company were changed to positive from stable, while Central Maine Power's outlook was stabilized. All other outlooks remain stable.

Outlook Actions:

..Issuer: AVANGRID RENEWABLES Holdings, Inc.

....Outlook, Changed to Positive from Stable

..Issuer: Avangrid

....Outlook, Remains Stable

..Issuer: Berkshire Gas Company

....Outlook, Changed To Positive From Stable

..Issuer: Connecticut Natural Gas Corporation

....Outlook, Remains Stable

..Issuer: New York State Electric and Gas Corporation

....Outlook, Remains Stable

..Issuer: Rochester Gas & Electric Corporation

....Outlook, Changed To Positive From Stable

..Issuer: Southern Connecticut Gas Company

....Outlook, Changed To Positive From Stable

..Issuer: United Illuminating Company

....Outlook, Remains Stable

..Issuer: Central Maine Power Company

....Outlook, Changed To Stable From Positive

Upgrades:

..Issuer: Central Maine Power Company

.... Issuer Rating, Upgraded to A2 from A3

....Pref. Stock Preferred Stock , Upgraded to Baa1 from Baa2

....Senior Secured First Mortgage Bonds, Upgraded to Aa3 from A1

....Senior Unsecured Commercial Paper, Upgraded to P-1 from P-2

....Senior Unsecured Medium-Term Note Program, Upgraded to (P)A2 from (P)A3

....Senior Unsecured Regular Bond/Debenture, Upgraded to A2 from A3

Affirmations:

..Issuer: AVANGRID RENEWABLES Holdings, Inc.

....Backed Issuer Rating, Affirmed Baa1

..Issuer: Avangrid

.... Issuer Rating, Affirmed Baa1

..Issuer: Berkshire Gas Company

.... Issuer Rating, Affirmed Baa1

..Issuer: Connecticut Natural Gas Corporation

....Senior Unsecured Medium-Term Note Program, Affirmed (P)A3

....Senior Unsecured Regular Bond/Debenture, Affirmed A3

..Issuer: Indiana County I.D.A., PA

....Senior Secured Revenue Bonds, Affirmed A3

..Issuer: New Hampshire (State of) Business Fin. Auth.

....Senior Unsecured Revenue Bonds, Affirmed Baa1

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa1

....Underlying Senior Unsecured Revenue Bonds, Affirmed Baa1

..Issuer: New York State Electric and Gas Corporation

.... Issuer Rating, Affirmed A3

....Senior Unsecured Commercial Paper, Affirmed P-2

....Senior Unsecured Regular Bond/Debenture, Affirmed A3

..Issuer: New York State Energy Research & Dev. Auth.

....Backed Revenue Bonds, Affirmed A2

....Senior Secured Revenue Bonds, Affirmed A2

....Underlying Senior Secured Revenue Bonds, Affirmed A2

....Underlying Senior Unsecured Revenue Bonds, Affirmed A3

....Underlying Senior Unsecured Revenue Bonds, Affirmed Baa1

....Backed Senior Unsecured Revenue Bonds, Affirmed A3

..Issuer: Rochester Gas & Electric Corporation

.... Issuer Rating, Affirmed Baa1

....Senior Secured First Mortgage Bonds, Affirmed A2

....Underlying Senior Secured First Mortgage Bonds, Affirmed A2

..Issuer: Southern Connecticut Gas Company

.... Issuer Rating, Affirmed Baa1

....Senior Secured First Mortgage Bonds, Affirmed A2

....Senior Secured Medium-Term Note Program, Affirmed (P)A2

....Senior Secured Regular Bond/Debenture, Affirmed A2

..Issuer: United Illuminating Company

.... Issuer Rating, Affirmed Baa1

RATINGS RATIONALE

"Avangrid's Baa1 rating reflects the strength of its regulated utility subsidiaries that account for 65% of operating cash flow generation as well as the largely contracted nature of its unregulated business" said Lesley Ritter, Analyst. Ritter added that "offsetting these credit positives is our expectation that the company's leverage will incrementally grow over time, causing its credit metrics to soften and come in line with the company's current rating".

Avangrid's Baa1 stable rating and outlook reflect the sound base of its operating cash flows that are 65% derived from the company's seven utility companies, six of which are rated Baa1 or above with stable or positive outlooks. The utilities operate under generally constructive regulatory frameworks with credit supportive ratemaking mechanisms that allow for stable and predictable operating cash flow generation.

Avangrid's exposure to unregulated businesses is significant at 35% of operating cash flows, but the vast majority of these are generated through its wind farms' long-term contracts with credit-worthy counterparts, another credit positive. There is some contagion exposure associated with un-contracted unregulated segments but we think the risk is manageable and concentrated in merchant power markets and natural gas trading and marketing. Still the rating recognizes the materially riskier nature of these businesses, including their potential for significant cash flow volatility and cash calls for the natural gas trading business.

The vast majority of Avangrid's leverage resides with its utilities and there is very little parent holding company debt. However, over time, we expect the financial ratios to weaken as the company executes on an ambitious capital expenditure plan and seeks to maintain a dividend payout ratio of 65-75%. Achieving these two goals simultaneously will likely require a further leveraging of the parent and/or the unregulated business. Still, we believe that with cash flow from operations pre-working capital to debt near 25% and debt to capitalization of about 25%, the rating leaves room for incremental debt, assuming its business mix remains unchanged and continued constructive regulatory relationships with its various state and Federal regulators.

The upgrade of Central Maine Power to A2 was prompted by the completion and energization of its $1.4 billion Maine Power Reliability Program in 2015 which was brought online on time and on budget. The completion of this project removes a the execution risk the company had been facing during the construction period and materially improves its business risk profile. It also increases its exposure to FERC regulation, another credit positive.

The change in Rochester Gas and Electric's (RG&E) outlook to positive from stable reflects a sustained improvement in its financial metrics that are comparable to those of its more highly rated sister utility company, New York State Electric & Gas (A3 stable). The outlook also takes into account the credit supportive regulatory relationship it maintains with its state regulator as well as a strong suite of cost recovery mechanisms that allow the company to generate stable and predictable cash flows.

The positive outlooks of both Southern Connecticut Gas Company and Berkshire Gas Company reflect our expectation that the utilities will secure the decoupling mechanism and infrastructure trackers available in their respective states when they file their next rate case in 18-24 months. Access to these mechanism will support greater stability of cash flow generation, a material credit positive.

The positive outlook for Avangrid Renewables Holdings, Inc. (ARHI) reflects the positive outlook of its guarantor Iberdrola S.A. (ISA Baa1 positive) as well as its strong, standalone, financial metrics.

The affirmation and stable outlooks of the remaining utility companies, New York State Electric and Gas (NYSEG), United Illuminating (UI), and Connecticut Natural Gas (CNG) reflect the generally constructive relationship each utility maintains with its respective regulator, with NYSEG benefitting from the more credit supportive regulatory construct of the three, the low business risk profile of their utility operations, and generation of financial metrics that are in line for NYSEG or strong for UI and CNG relative to their ratings.

The principal methodology used in rating Avangrid, Inc, New York State Electric and Gas Corporation, Berkshire Gas Company, Rochester Gas & Electric Corporation, Connecticut Natural Gas Corporation, Southern Connecticut Gas Company, and United Illuminating Company was Regulated Electric and Gas Utilities published in December 2013. The principal methodology used in rating Central Maine Power Company was Regulated Electric and Gas Networks published in November 2014. The principal methodology used in rating AVANGRID RENEWABLES Holdings, Inc. was Unregulated Utilities and Unregulated Power Companies published in October 2014.

Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Lesley Ritter
Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

William L. Hess
MD - Utilities
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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