(Source: Business Wire)
Fitch Ratings has assigned an 'A-' rating to AGL Capital Corp.'s issuance of $300 million 5.25% senior notes due 2019. AGL Capital Corp. is the financing subsidiary of AGL Resources Inc. (AGL) and its debt is fully and unconditionally guaranteed by AGL. The Rating Outlook is Stable. Note net proceeds will be used to repay a portion of outstanding short-term debt.
AGL Capital Corp.'s rating and Stable Rating Outlook reflect the low business risk of AGL's core regulated gas distribution business and management's favorable track record of operating and investing in a growing portfolio of non-regulated businesses. AGL's utility operations are supported by beneficial rate design and generally favorable service territory demographics. However, overall customer growth for 2009 is expected to be flat or slightly negative due to a weak residential housing market and recessionary general economy. Furthermore, bad debt expense, also affected by the economy, has modestly increased but remains within acceptable norms.
As a pure energy delivery company, Atlanta Gas Light Co. (AGLC), operates under volume-insensitive straight-fixed variable rates. In addition, the adoption of weather-normalized rates (WNR) and partial rate decoupling for Virginia Natural Gas, Inc. (VNG) and WNR at Elizabethtown Gas Co. (EGC) contributes further to operating stability. In March 2009, EGC filed in New Jersey for a $25 million increase in base rates, revised downward in June to $17 million, and the adoption of a revenue decoupling mechanism. New rates are anticipated to be effective in New Jersey by late 2009 to early 2010. Future rate filings are expected to be made in Georgia, Virginia and Tennessee during the next 12 months.
In part to support local economic recovery, EGC and AGLC have proposed making accelerated infrastructure investments in New Jersey and Georgia, respectively. If the company's plans are adopted as conceived, spending will ramp up in 2010. While the increased investment would likely result in higher debt leverage over the near term, regulatory mechanisms should support full recovery.
AGL's non-utility businesses are primarily focused in three areas: retail gas marketing through SouthStar Energy Services LLC (SouthStar) its joint venture with Piedmont Natural Gas Co.; wholesale gas services through Sequent Energy Management, L.P. (Sequent); and investments in high-deliverability natural gas storage and telecommunication networks. On July 30, 2009, AGL announced that it will acquire an additional 15% ownership interest in SouthStar for $57.5 million. The transaction is expected to close on Jan. 1, 2010, after which AGL will own 85%.
