A $150 Million CP Program and Bank Loan Rated
New York, March 23, 2011 -- Moody's Investors Service assigned a rating of Prime-2 for Northern
States Power Company, a Wisconsin corporation (NSP-Wisconsin),
in connection with the company's newly established $150 million
Section 4(2) exempt commercial paper program. Moody's also
assigned an A3 rating to NSP-Wisconsin's new credit agreement
which will backstop its commercial paper program. Moody's
affirmed NSP-Wisconsin's existing ratings, including the
A3 rating on its senior unsecured debt obligations, and its stable
outlook.
Assignments:
..Issuer: Northern States Power Company (Wisconsin)
....Senior Secured Bank Credit Facility,
Assigned A3
....Senior Unsecured Commercial Paper,
Assigned P-2
RATINGS RATIONALE
The Prime-2 rating recognizes the stability and predictability
of cash flows generated by NSP-Wisconsin's regulated operations.
In the fiscal year ended December 2010, the company internally funded
its capital expenditures. Over the next several years, however,
NSP-Wisconsin expects its capital expenditures to step up significantly
above historical levels while it invests in new electric generation and
transmission assets for the Northern States Power system.
The Prime-2 rating assumes that NSP-Wisconsin will manage
the amount of commercial paper and other near term obligations outstanding
within the limits of its readily available sources of cash, including
its new committed bank credit facility. Moody's believes
that the $150 million program should be ample for its foreseeable
liquidity needs over the medium term.
"NSP-Wisconsin has improved its liquidity resources by establishing
its own external short-term borrowing program," says Moody's
Vice President Mihoko Manabe. "The utility will no longer have
to rely on affiliate borrowing agreements while it undergoes a period
of heavier than normal capital investments."
Previously, NSP-Wisconsin's alternative source of liquidity
comprised an affiliate agreement to borrow up to $100 million from
its sister utility Northern States Power -- Minnesota (NSP-Minnesota,
A3 senior unsecured).
NSP-Wisconsin recently put in place a $150 million unsecured
revolving credit facility rated A3 that matures in March 2015.
The sole financial covenant is the maintenance of a maximum 65%
consolidated debt-to-capital ratio. Based on the
covenant calculations, NSP-Wisconsin was comfortably in compliance
with this test at 45% as of December 31, 2010. After
implementation, each extension of credit does not require a representation
that there has been no material adverse change in the condition of NSP-Wisconsin.
Moody's believes that the lack of such conditional language improves
the quality of this credit facility, because it reduces the risk
that the banks refuse to lend under it in a time of stress.
NSP-Wisconsin's rating outlook is stable, reflecting the
low volatility of the financial performance of the company's underlying
utility operations, the supportive regulatory environment in Wisconsin,
and the sound financial policies under its ownership by Xcel Energy Inc.
(Baa1 senior unsecured).
Positive rating action could result from a sustainable improvement in
financial performance as demonstrated, for example, by cash
flow from operations before working capital (CFO pre-WC) as a percentage
of total adjusted debt being sustained above 25%. Moody's
believes that excluding the temporary near-term benefit of bonus
depreciation, NSP-Wisconsin's credit metrics would
be more prone to softening over the next several years of higher than
normal capital spending.
Negative rating action could result from a deterioration of financial
performance as demonstrated, for example, by CFO pre-WC
as a percentage of total adjusted debt falling below 20% for an
extended period. Factors that could contribute to this deterioration
include adverse regulatory rulings and significant operating difficulties.
Because of NSP-Wisconsin's operational integration with NSP-Minnesota
and its financial integration with Xcel, NSP-Wisconsin's
ratings could move up or down with a change in the ratings of NSP-Minnesota
or Xcel.
The principal methodology used in this rating was Regulated Electric and
Gas Utilities published in August 2009.
Northern States Power Company, a Wisconsin corporation, is
headquartered in Eau Claire, Wisconsin. The company is one
of the four principal operating subsidiaries of Xcel Energy Inc.,
an electric utility holding company.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information, confidential
and proprietary Moody's Analytics information, public and
other 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.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Mihoko Manabe
VP - Senior Credit Officer
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
William L. Hess
MD - Utilities
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns Prime-2 to Northern States Power Co Wisconsin
