TEXT-Fitch: U.S. utilities, power, gas outlook stable

Fri Dec 7, 2012 1:27pm EST

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Dec 7 - Fitch Ratings' 2013 outlook for the U.S. Utility Parent Companies
and Investor Owned Utilities is stable, despite modest deterioration in
operating environment due to sluggish sales. Low power prices create a
benevolent backdrop of low customer rates, thus providing headroom for utilities
to seek rate increase to recover still elevated capital expenditures. Strong
capital market access and ample liquidity further support the stable outlook.

Fitch's 2013 outlook for the competitive generation companies is negative
reflecting a slow recovery in power prices, intensifying retail competition,
continued stringent environmental policies, and uneven access to capital
markets. The affiliated generation companies are at the highest rating risk
unless managements proactively reduce leverage. This, in turn, presents rating
pressures for the parent companies with competitive generation subsidiaries.

Fitch expects sector EBITDA to grow in 2013 as regulated utilities earn a return
on the significant capital investments made in preceding years. However, FFO is
expected to decline as the temporary boost from bonus depreciation and other tax
incentives fades. The FCF profile, while still a deficit, improves in 2013 as
projected capex falls from the 2012 peak.
Fitch expects strong liquidity conditions to prevail and low debt financing
costs to ease pressure on customer bills, particularly in a period of high
capex. Fitch also expects continued industry consolidation.

The full '2013 Outlook: Utilities, Power, and Gas' is available at
'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: 2013 Outlook: Utilities, Power, and
Gas
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