Investor-owned utilities in the United States were relatively stable during the first quarter of 2007, according to a report released Monday by Standard & Poor's Ratings Services. The S&P quarterly assessment found rating activity was "mixed in a quiet first quarter." Overall, during the past 12 months, the percentage of top S&P "A"-rated utilities grew and the number of speculative-grade-rated (BB+ and below) utilities decreased.

The S&P assessment contrasts with a front-page report in Wednesday's The Wall Street Journal chronicling the $100 billion explosion of utility mergers and acquisitions (M&A) in Europe in anticipation of the July 1 opening of the deregulated wholesale power market among the 27-nation European Union.

In contrast, M&A activity in the United States has been relatively calm, and S&P raised the corporate credit ratings of seven utility holding companies and their operating subsidiaries, while lowering three corporate ratings, all of which were related to TXU Corp., which is in play in the largest private equity leveraged buyout ever at $45 billion announced earlier this year by Kohlberg Kravis Roberts & Co. and the Texas Pacific Group.

Noting that the first three months of this year produced few, and mixed, changes in Credit Watch placements and outlooks, S&P analyst Barbara Eiseman said almost none of the revisions could be "traced to event risk, such as mergers and acquisitions and the sale of noncore operations."

The ratings distribution in the utility sector during the past 12 months, S&P concluded, "has changed very slightly," but it was enough to shift the average rating out of the triple-"B" category (BBB+, BBB, and BBB-). The percentage in that solid investment-grade category stayed at around 56% of the utilities, S&P said.

"While the percentage of utilities rated A- and above has increased to about 31% from 28% since March 31, 2006, just 14% of all ratings fall into speculative-grade sector (BB+ and below) compared with more than 16% one year ago," Eiseman said.

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