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I AGREE
09 Sep 2009
Approximately $435 million of securities affected
New York, September 09, 2009 -- Moody's Investors Service downgraded the long-term ratings
of Central Hudson Gas & Electric Corporation (CHG&E; senior
unsecured to A3 from A2). The rating outlook is negative.
The rating action reflects persisting weakness in CHG&E's financial
performance through the 12 months ended June 30, 2009 and the ongoing
challenges to reverse this trend given the financing required to fund
negative free cash flow resulting from higher than historical average
projected capital expenditures over the next few years.
"Even with the rate relief provided by the New York Public Service
Commission (NYPSC) effective July 1, 2009, Moody's does
not expect that CHG&E will be able to sufficiently strengthen its
credit metrics to levels in line with its A2 senior unsecured debt rating",
said Moody's Vice President, Kevin Rose.
Moody's calculates that CHG&E's cash flow pre-working
capital changes covered its debt and interest by 14% and 3.0x,
respectively, for the 12 months ended June 30, 2009.
These metrics are more typical of regulated utilities in the Baa rating
category and can partly be attributed to the effects of regulatory lag,
as well as adjustments for underfunded pension obligations. CHG&E
is again seeking base electric and gas rate increases through a July 31,
2009 filing with the NYPSC. "The increased dependence on
rate filings to address regulatory lag in the currently challenging economic
environment adds to credit uncertainty", Rose added.
Importantly, CHG&E's liquidity is expected to remain sufficient
to meet its short-term financing requirements, with ample
unused capacity under its committed multi-year bank revolver to
supplement its cash flow from operating activities.
CHG&E's negative rating outlook takes into account its weak credit
metrics and ongoing need for rate relief to support large planned capital
expenditures and strengthen financial performance at a time when the NYPSC
is imposing austerity measures on all NY-based utilities.
The likelihood of a further rating downgrade would increase if CHG&E's
financial performance continues to suffer despite a revenue decoupling
mechanism intended to address reduced electric and gas sales due to customer
usage patterns influenced by weather and the economy and/or we detect
signs that regulatory supportiveness is lacking in the currently pending
rate case.
CHG&E ratings downgraded include:
Senior Unsecured Debt and Issuer Ratings to A3 from A2
Preferred Stock to Baa2 from Baa1
The last rating action for CHG&E was taken September 19, 2008
when Moody's affirmed CHG&E's ratings and its rating outlook
was changed to negative from stable.
The principal methodology used in rating CHG&E is Regulated Electric
and Gas Utilities, which can be found at www.moodys.com
in the Credit Policy and Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating CHG&E can also be
found in the Credit Policy & Methodologies directory.
Central Hudson Gas & Electric Corporation is a regulated electric
and gas transmission and distribution utility and the principal operating
subsidiary of CH Energy Group, Inc. The parent company also
conducts energy related unregulated business activities through Central
Hudson Enterprises Corporation. Company headquarters are located
in Poughkeepsie, New York.
New York
Kevin G. Rose
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
A.J. Sabatelle
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades Central Hudson G&E to A3; outlook remains negative
No Related Data.
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