Moody’s Investor’s Service downgraded the senior unsecured debt of Bedminster, NJ-based NUI Utilities to Baa1 from A3 and the senior unsecured debt of its non-regulated parent, NUI Corp., to Baa2 from Baa1, with a negative outlook. NUI’s earnings and cash flow have been under pressure by warm winter weather, a lackluster economy and the unfavorable market conditions in the marketing and trading business.

Those negative factors have “yielded weaker credit and fixed charge coverage measures when compared with its LDC peers,” Moody’s said. “The impact of warm weather and the poor economy is evidenced in NUI Corp.’s recently announced earnings before interest and taxes (EBIT) which were down 16% and 98%, respectively, for the nine months and three months ending June 30.

“Credit measures have been weakening over the past 18 months with poor business conditions affecting revenues in all segments of NUI Corp. except for NUI Virginia Gas and NUI Telecom. These credit measures are not expected to materially improve in the near future,” Moody’s added.

NUI has made a regulatory filing for rate recovery under its weather normalization clause but a decision is not expected until near the end of this year. Meanwhile, the unfavorable conditions in the energy trading market have resulted in lower third quarter EBIT for the company’s marketing and trading segment.

“Lower trading volumes and reduced credit quality of trading counterparties have resulted in lower earnings,” said Moody’s. “While the company’s [proposed] Richton, MS, gas storage field (see Daily GPI, July 19) has received positive results from its ‘open season’ expressions of interest, it will be sometime before the gas storage facilities are able to generate revenues and income as various options for financing the capital expenditures are considered.”

NUI distributes natural gas to 380,000 customers in seven states along the eastern seaboard. Its largest utility subsidiary is Elizabethtown Gas Co. in New Jersey.

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