SALE OF NUCLEAR FACILITIES TO HAVE POSITIVE RATING IMPLICATIONS FOR NORTHEAST UTILITIES, MOODY'S SAYS
Moody's Investor Service is maintaining its ratings review for possible upgrade on Northeast Utilities (NU), Public Service Company of New Hampshire (PSNH), and North Atlantic Energy Corporation and is confirming the ratings on two of NU's operating utility subsidiaries - The Connecticut Light & Power Company (CL&P) and Western Massachusetts Electric Company (WMECO). The debt of both these companies has recently been upgraded to the Baa3 level and each has been assigned a positive rating outlook. This rating action is being taken to reflect the announcement by NU that it intends to auction its nuclear power plants and exit the nuclear generation business. Furthermore, none of NU's subsidiaries, either regulated or non-regulated, will participate in any auctions of company owned nuclear facilities.
Moody's views this announcement in a positive manner insofar as it will likely bring a quicker than anticipated end to NU's often times troubled nuclear operating past. The announcement seems timed to take advantage of a strengthening market for nuclear assets and as such any incremental gain on the sale could be used to further solidify the company's financial position. Pursuant to restructuring legislation in both Connecticut and Massachusetts, those company's were to divest all generation assets. In particular, the Connecticut law required CL&P to divest its nuclear assets by January 1, 2004. Therefore, while the divestiture of nuclear assets by the regulated operating companies had been assumed in the Moody's current ratings, the companies' future involvement in the nuclear generation business, the timing of any sales, and the resulting proceeds were not. Each of these items will likely have positive implications for the existing ratings. In addition, future ratings changes for both NU and its utility subsidiaries will be influenced by the benefits associated from the companies' ongoing restructuring activities and future regulatory decisions.
The first step in the exit process will be the auction of the companies' three unit Millstone nuclear facility. The proposed auction will cover CL&P's 81% ownership and WMECO's 19% ownership of the 880 megawatt Unit 2, and CL&P's 53% ownership and WMECO's 12% ownership of the 1,150 megawatt Unit 3. Public Service Company of New Hampshire's 3% ownership will likely be included once the pending settlement agreement between the company and the State of New Hampshire is approved. NU is proposing to include Unit 1, which is currently being decommissioned, in the auction. Various investor-owned utilities, located primarily in the northeast, own the remaining 32% of Unit 3. It is probable that some of these may subsequently chose to participate in the auction process.
The company's ownership of its remaining nuclear asset, the Seabrook Nuclear Station, will also be auctioned. A date is dependent upon the implementation of the settlement agreement between PSNH and the State of New Hampshire.
Headquartered in Berlin, Connecticut, Northeast Utilities is the holding company for The Connecticut Light & Power Company, CL&P Capital, L.P., Western Massachusetts Electric Company, and Public Service Company of New Hampshire.
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