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31 Oct 2006
Moody's changes FPL Group and FP&L outlook to stable from negative
Approximately $7.0 billion of debt securities affected
New York, October 31, 2006 -- Moody's Investors Service affirmed the ratings FPL Group,
Inc. (A2 Issuer Rating), FPL Group Capital Inc (A2 senior
unsecured) and Florida Power & Light Company (FP&L, A1 Issuer
Rating) and revised the rating outlooks to stable from negative.
Moody's also affirmed the ratings of FPL Fuels, Inc.
(Prime-1 short-term rating for commercial paper),
guaranteed by FP&L; and FPL Group Capital Trust I (A3 preferred
stock), guaranteed by FPL Group, and revised the rating outlooks
to stable from negative.
The revision of the rating outlooks of FPL Group and its subsidiaries
back to stable is prompted by the recently announced termination of its
planned merger with Constellation Energy Group, Inc. (CEG).
The companies cited continued uncertainty over regulatory and judicial
matters in Maryland and the potential for a protracted and open-ended
merger review process as reasons for the termination. Since the
merger announcement last December, adverse regulatory developments
in Maryland raised questions regarding whether Maryland regulators would
approve the transaction without financial concessions that would change
the economics of the deal. The negative outlook on the ratings
of FPL Group and its subsidiaries had reflected the higher business risk
associated with CEG's unregulated generation and risk management
businesses, CEG's larger competitive wholesale and retail
operations, and the higher proportion of cash flow generated from
unregulated businesses at CEG as compared to FPL Group.
The affirmation of the ratings of FPL Group and FPL Group Capital with
a stable outlook reflects the comparatively limited business risk of its
unregulated activities, a well diversified power plant portfolio,
both geographically and by fuel source, the modest amount of new
generation being added, the positive cash flow that is now being
generated from the portfolio, and the high percentage of the portfolio
that is under contract. The ratings also consider the relatively
high leverage at FPL Group Capital, most of which was used to finance
the buildout of the portfolio over the last several years.
The affirmation of the ratings of FP&L reflects the utility's
strong financial performance and cash flow coverage ratios, although
these measures declined in 2005 due to large hurricane and fuel cost related
deferrals. Cash flow coverage metrics have begun to recover during
the first half of 2006 as some deferred costs have begun to be recovered.
The stable outlook also reflects the utility's relatively low leverage,
robust demand growth, favorable demographics, and the very
low percentage of industrial customers. The utility operates in
a generally constructive regulatory environment with its 2005 rate settlement
ensuring rate stability through 2009 and most storm costs being recovered
either through surcharges or a $700 million securitization financing
expected later this year.
FPL Group Capital is a 100% owned subsidiary of FPL Group,
Inc., a public utility holding company headquartered in Juno
Beach, Florida. FPL Group is also the parent company of Florida
Power & Light Company, a rate-regulated utility that
is also headquartered in Juno Beach.
William L. Hess
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Michael G. Haggarty
VP - Senior Credit Officer
Corporate Finance Group
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.
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