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20 Apr 2011
London, 20 April 2011 -- Moody's Investors Service has today assigned a definitive Baa3 rating
to the 3.900% USD460 million Senior Notes due 2016 and to
the 5.375% USD500 million Senior Notes due 2021 (together
"the Notes") issued by PPL WEM Holdings plc (PPL WEM);
the rating outlook is stable.
RATINGS RATIONALE
Moody's says the Baa3 rating reflects PPL WEM's position as
holding company of Western Power Distribution (East Midlands) plc (WPDEM),
and of Western Power Distribution (West Midlands) plc (WPDWM), two
UK distribution network operators (DNOs), following its recent acquisition
of the two companies. Together they are referred to as the WPDM
Group. PPL WEM's Baa3 rating takes account of the overall
consolidated credit quality of the WPDM Group, as well as the credit
profile of the two DNOs.
Moody's rates WPDEM and WPDWM Baa1, reflecting their very
low business risk profile as monopoly providers of electricity distribution
services in their licensed areas in the Midlands region of the UK.
Their business is conducted within a regulatory framework that Moody's
regards as well-established and generally transparent, thus
providing a good degree of stability and predictability of cash flows.
The ratings take account of the two networks' moderate operating
performance during the latest price control review period, as well
as management's plans for improving this. The ratings of
the two DNOs also factor in a targeted capital structure as reflected
in an estimated net debt/regulated asset value (RAV) in the mid 60%s.
Moody's view of the overall consolidated credit quality of the WPDM
Group also takes account of certain non-regulated assets and liabilities,
as well as the additional indebtedness implied by PPL WEM's bond
issuance. Moody's estimates this will result in net debt/RAV
in the low 80%s, and assesses overall credit quality of the
WPDM Group at Baa2. In assigning the Baa3 rating Moody's
has notched down from the consolidated credit quality of the WPDM group
of companies to reflect PPL WEM's creditors' distance from the operating
companies' cash flows and the possible negative consequences of the regulatory
ring-fence applied to WPDEM and WPDWM for creditors of PPL WEM.
The stable outlook reflects Moody's expectation that the WPDM Group will
maintain its leverage as measured by net debt/RAV in the low 80%s.
It also assumes that the refinancing of the GBP3.6 billion acquisition
facility is completed on a timely basis. Upward pressure on the
rating is unlikely given the networks' recent moderate operating performance
and targeted leverage. Conversely, deterioration in operating
performance versus plan and/or a change in financial policy resulting
in WPDM leverage trending towards the mid-80%s would exert
downward pressure on PPL WEM's Baa3 rating.
The principal methodology used in this rating was Regulated Electric and
Gas Networks published in August 2009.
Headquartered in Bristol, UK, PPL WEM Holdings plc owns and
operates two electricity distribution networks serving approximately 5.1
million customers in the Midlands through a network of approximately 83,000
kilometres of underground cables and overhead lines. PPL WEM is
an indirectly wholly-owned subsidiary of PPL Corporation (rated
Baa3), the US utility group.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's Analytics
information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
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Please see ratings tab on the issuer/entity page on Moodys.com
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The date on which some Credit Ratings were first released goes back to
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London
Niel Bisset
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Monica Merli
MD - Infrastructure Finance
Infrastructure Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
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JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns Baa3 senior unsecured debt rating to PPL WEM Holdings; stable outlook
No Related Data.
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