Fitch Rates Xcel Energy's $450MM Sr. Unsecured Notes 'BBB+'; Outlook Stable

Tue May 7, 2013 10:18am EDT

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(The following statement was released by the rating agency) NEW YORK, May 07 (Fitch) Fitch Ratings has assigned a 'BBB+' rating to Xcel Energy Inc.'s (XEL) new 0.75% $450 million issuance of senior unsecured notes due May 9, 2016. The Rating Outlook is Stable. The new notes will rank pari passu with XEL's existing senior unsecured obligations. Net proceeds will be used to repay short-term debt borrowings and for other general corporate purposes, including the funding and redemption, on May 31, 2013, of XEL's 7.6% $400 million junior subordinated notes due in 2068. KEY RATING DRIVERS Conservative & Predictable Business Model XEL's earnings and operating cash flows are supported by its ownership of four low-risk regulated utilities that operate in what Fitch considers to be balanced regulatory compacts across eight state regulatory jurisdictions. Management strategy continues to be centered on successfully managing rate cases and on funding capital investments towards rate-base growth projects that provide relatively stable returns. Solid Credit Metrics For the latest 12 months ended March 31, 2013, , the ratios of EBITDA/interest and debt/EBITDA were 4.8x and 3.8x, respectively. The ratios of funds from operations (FFO)/interest and FFO/debt were 4.9x and 21.0%, respectively. Fitch expects recurring tariff increases and rate base capital additions to continue to support consolidated credit protection measures at levels in line with the current rating category. Fitch estimates EBITDA/interest and FFO/debt to be about 5.2x and 20%, respectively, through 2014. Balanced Regulatory Treatment Utility rate design is enhanced by the timely recovery of fuel and purchased power costs in all jurisdictions. Implementation of a multi-year rate plan for electric rates in Colorado in 2012 provides near-term regulatory predictability and cash flow stability. Additionally, several of the utilities have non-fuel rate riders that facilitate timely recovery of environmental and transmission-related investments, mitigating regulatory lag. Fitch will continue to monitor developments in several pending rate proceedings, the most significant of which is in Minnesota where NSP-Minnesota is requesting an electric retail rate increase of approximately $215.4 million, based on a return on equity (ROE) of 10.6%, an equity ratio of 52.56%, and a 2013 forecast test year. A rate decision is expected by September 2013. There are pending regulatory proceedings in Colorado, Texas, New Mexico and North Dakota as well. Fitch expects all rate outcomes to be balanced, while recognizing challenging regulatory environments in Texas and New Mexico. Sizeable Capital Investment Plan Consolidated capex is expected to total a substantial $12.9 billion over the 2013-2017 forecast period. Favorably, capital spending is focused on relatively low-risk rate base growth investments, including 30% earmarked for electric transmission, 26% for electric generation, and 20% for electric distribution. Timely and adequate recovery of capex will be critical to maintaining XEL's current rating profile, in Fitch's view. Fitch expects XEL to fund capex with a balanced mix of internally generated funds, long-term debt, and equity. Strong Liquidity Total consolidated borrowing capacity amounts to $2.45 billion under five separate five-year bank credit facilities. As of April 30, 2013, there was $2.02 billion of consolidated available liquidity, including $2.9 million of cash on hand. Fitch considers consolidated debt maturities to be manageable with $258 million due in 2013, $281 million due in 2014, and $256 million due in 2015. Fitch expects XEL and its utility subsidiaries to continue to enjoy unrestricted access to capital markets over the forecast years. RATING SENSITIVITIES Funding of a large multi-year capital investment plan and the uncertain rate outcomes of several utility pending regulatory proceedings limit prospects for a positive rating action. Adverse rate decisions or the inability to successfully execute and adequately recover capital investments could weaken XEL's financial profile and have a negative impact on ratings. Contact: Primary Analyst Philippe Beard Director +1-212-908-0242 Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 Secondary Analyst Lindsay Minneman Director +1-212-908-0592 Committee Chairperson Timothy Greening Managing Director +1-312-368-3205 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (Aug. 8, 2012); --'Recovery Ratings and Notching Criteria for Utilities' (May 3, 2012); --'Rating North American Utilities, Power, Gas, and Water Companies' (May 16, 2012); --'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012). Applicable Criteria and Related Research Parent and Subsidiary Rating Linkage here Rating North American Utilities, Power, Gas, and Water Companies here Recovery Ratings and Notching Criteria for Utilities here Corporate Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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