A couple of Pacific Northwest utilities were sent in opposite directions by Standard & Poor’s Ratings Services Thursday as the credit rating agency boosted Spokane, WA-based Avista Corp. one notch to “BBB-” and Cascade Natural Gas Corp. was granted its request to withdraw its “BBB+” corporate and senior unsecured debt rating.
Cascade was acquired by Bismarck, ND-based MDU Resources in a deal that closed last July, making the Seattle-based natural gas utility the third utility in the MDU group of companies. A corporate spokesperson for MDU said Cascade will continue to be rated separately for credit purposes but said it was cutting down on the number of rating services for which it paid and decided to drop S&P.
After agreeing to the acquisition in mid-2006, Cascade joined MDU’s other two utilities last July — Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. Collectively, the trio serves about a half-million customers. Cascade serves 246,000 customers in 93 communities, 65 of which are in western and south-central Washington state and 28 in south-central and eastern Oregon (see Daily GPI, June 29, 2007).
Regarding Avista, S&P indicated its ratings upgrade reflected the utility holding company’s favorable rate settlement in Washington state that was effective Jan. 1, providing a 9.4% electric increase and 1.7% increase in natural gas retail utility rates. “This increase importantly updates Avista’s test year using 2007 numbers and should assist in minimizing fuel and purchased power cost deferrals that have been ongoing issues for the company,” said Anne Selting, S&P credit analyst in San Francisco.
Other positives for Avista last year were its sale of its merchant energy and trading unit, Avista Energy, and what Selting called S&P’s expectation that the company is going to be more successful in future rate filings with regulators “that will be needed to keep pace with rising capital expenditures and upward pressure on costs, including fuel and purchased power expenses.”
Financial ratios for last year may still be a bit weak for the new rating, said Selting, but the rating agency thinks the financial improvements will be realized starting this year. She noted that in its past performance Avista had been hampered by losses at Avista Energy (on a gross margin and net income basis).
S&P said it expected the Avista utility operations to be stable, and the corporate ratings outlook was classified as “stable.”
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