(Source: Business Wire)
Fitch Ratings has affirmed the outstanding ratings for Wisconsin Energy Corp. (WEC), as well as its subsidiaries, Wisconsin Energy Capital Corp. (WECC), Wisconsin Electric Power Co. (WEPCO), and Wisconsin Gas LLC (WI Gas). Approximately $4.9 billion of debt is affected. The Rating Outlook for WEC, WECC, and WEPCO has been revised to Negative from Stable. The Rating Outlook for WI Gas remains Stable. A full description of the ratings is listed below:
Ratings Affirmed, Rating Outlook Negative
WEC
--Issuer Default Rating (IDR) at 'A-';
--Senior unsecured debt at 'A-';
--Junior subordinated debt at 'BBB+';
--Short-term IDR and commercial paper at 'F2'.
WECC
--IDR at 'A-';
--Senior unsecured debt at 'A-'.
WEPCO
--IDR at 'A';
--Senior unsecured debt at 'A+';
--Preferred stock at 'A';
--Short-term IDR and commercial paper at 'F1'.
Ratings Affirmed, Rating Outlook Stable
WI Gas
--IDR at 'A';
--Senior unsecured debt at 'A+';
--Short-term IDR and commercial paper at 'F1'.
The Negative Outlook for WEC and WEPCO reflect weaker than previously Fitch forecasted credit protection measures and higher debt leverage for both companies due to the impact of the economic recession on the local economy, specifically the large commercial and industrial (C&I) customers, as well as continued levels of elevated capital spending following completion of the new Oak Creek (OC) units due to planned environmental spending at the existing OC units and renewable energy investments to meet state mandated standards. The debt obligations of WECC, the funding vehicle for WEC's former non-regulated operations, are guaranteed by WEC, therefore the ratings of WECC reflect the credit quality of WEC.
Management currently estimates that total retail electric sales in 2009 will be around 8% lower than 2008 levels, with large C&I customers experiencing a 15% decline. Unemployment in WEC's service territory continues to trend slightly higher than the national average of 9.4%. While WEC plans to offset the impact of lower demand on its gross margin through internal cost controls and lower fuel prices, the company is not forecasted to experience a meaningful improvement in its credit metrics over the next three years.
The ratings for WEC take into consideration the underlying strength of its regulated electric and gas utility subsidiaries, from which it derives stable and consistent cash flow distributions. WEPCO and WI Gas continue to maintain stable operating performances and benefit from a constructive regulatory environment in Wisconsin.
