(The following statement was released by the rating agency)
Oct 10 - Fitch Ratings has assigned an 'A+' rating to NSTAR Electric's $400million issuance of 2.375% senior unsecured notes due Oct. 15, 2022.
Proceeds will be used to repay outstanding $400 million 4.875% Debentures dueOct. 15, 2012, and for general corporate purposes. The notes will rank on parityin right of payment with all existing and future senior unsecured debt. TheRating Outlook for NSTAR Electric is Stable.
Stable Credit Profile: NSTAR Electric's rating reflects the strong stand-alonecredit measures of the utility, including the low-risk nature of its regulatedtransmission and distribution operations, which deliver superior cash flowmetrics due in large part to balanced regulatory treatment. The rating alsotakes into consideration linkage with ultimate parent company, NortheastUtilities (Issuer Default Rating 'BBB+'/Stable Outlook).
Financial metrics are superior relative to Fitch guidelines for the rating andrisk profile, with rating forecasts for EBITDA to interest and FFO to debt at ornear 7.0 times (x) and 24%, respectively through 2014. Projected credit measuresinclude merger-related regulatory conditions, such as a one-time non-recoverable$15 million customer rate credit, a 44-month base distribution rate freeze, andstorm cost deferrals, in addition to the absence of bonus depreciation. Thecontinuation of existing rate-making regulatory mechanisms is expected tostabilize a material deterioration in financial metrics.
Balanced Regulatory Treatment: The inclusion of distribution rate orderfeatures, including timely recovery of costs related to energy supply, energyefficiency, the energy portion of bad debt, and pension and post-retirementbenefits other than pension costs, are supportive of credit quality. NSTARElectric has a Federal Regulatory Commission (FERC)-approved return on equity of11.14% on local transmission facility investments and 11.64% on regionaltransmission facilities.
Liquidity Position and Funding Needs: Fitch considers NSTAR Electric's liquidityposition to be sufficient relative to funding needs. The utility has a $450million stand-alone multi-year bank credit facility that matures in July 2017,and available borrowing capacity at June 30, 2012 was $105.5 million. Bankcredit supports the utility's commercial paper program.
Utility funding needs are moderate, with near-term debt re-financings limited toa $300 million note maturing in 2014. NSTAR Electric's five-year capital plan of$1.8 billion is focused primarily on system improvements and reliabilityprojects, including a new 345-kV, 26 mile transmission line serving southeasternMassachusetts and Cape Cod.
Fitch expects utility funding needs to be met with through a combination ofinternal cash flows and external debt financings. NSTAR Electric's access to thebank credit and debt capital markets is viewed by Fitch as unrestricted.
Negative Rating Action Trigger:
--An inability to manage costs during the base distribution rate freeze periodcould negatively affect the utility's financial position and put pressure on theratings.
--An inability to earn adequate and timely returns on invested capital.
Positive Rating Action Trigger:
--Positive rating action at NSTAR Electric is not envisioned at this time.
(Caryn Trokie, New York Ratings Unit)