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Fitch Rates Northern States Power - Wisconsin's $100MM Issuance of Senior Secured Notes 'A+'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'A+' rating to Northern States Power - Wisconsin's (NSP-WI) $100 million issuance of 3.700% senior secured notes, Series due Oct. 1, 2042.

Proceeds will be used to repay short-term borrowings, and for general corporate purposes. The notes will rank on parity in right of payment with all existing and future senior secured debt. The Rating Outlook for NSP-WI is Stable.

Stable Outlook

The rating of NSP-WI is supported by the low-risk nature of its regulated utility operations, which deliver consistent cash flow metrics due in large part to balanced regulatory treatment across two state jurisdictions.

Financial metrics are consistent with Fitch guidelines for the rating and risk profile, with rating forecasts for EBITDA to interest and FFO interest coverage above 6x through 2013. Fitch projections are predicated on full and timely cost recoveries.

Balanced Regulatory Treatment

A final rate order was issued for the NSP-WI general rate case in December 2011, authorizing electric and gas rate increases of $12.2 million and $2.9 million, respectively, and a 10.4% ROE. Utility rate order features, including use of a forward test period and mechanisms for fuel cost and purchased energy adjustments, are supportive of credit quality.

NSP-WI filed a new rate filing in June 2012 for electric and gas rate increases of $39.1 million and $5.3 million, respectively, effective in 2013 and based on a 10.4% ROE. The gas rate filing is intended to recover initial, agreed upon, environmental site clean-up costs.

Manageable Capital Investment Plan

NSP-WI plans to invest up to $1 billion through 2016 on a combination of transmission projects to support system reliability, renewable investments to satisfy state renewable portfolio standards, and environmental projects. Fitch anticipates this moderate level of capital spending will be funded using a balanced combination of cash on hand, equity infusions from parent company Xcel Energy, Inc. (Issuer Default Rating 'BBB+'; Stable Outlook by Fitch), and debt capital market financings.

Sufficient Liquidity and No Debt Re-financings through 2016

Fitch considers the NSP-WI liquidity position sufficient relative to moderate utility funding needs, with $71 million in borrowing capacity available and $1.8 million cash on hand at June 30, 2012. NSP-WI amended pricing terms and extended the maturity date on its existing four-year $150 million bank credit facility in July 2012. The facility expiration date is extended from March 2015 to July 2017, and no single bank has extended greater than 8% of the $150 million borrowing capacity.

NSP-WI did not have a separate bank credit facility prior to March 2011. Fitch considers the addition of a stand-alone bank credit facility, and the facility expiration date extension as supportive of credit quality.

Negative Rating Action Trigger:

--An adverse regulatory order that negatively affects the financial position of the utility.

Positive Rating Action Trigger:

--Positive rating action at NSP-WI is not envisioned at this time.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Recovery Ratings and Notching Criteria for Utilities' (May 3, 2012);

--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012);

--'Rating North American Utilities, Power, Gas and Water Companies' (May 16, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Recovery Ratings and Notching Criteria for Utilities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677735

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

Rating North American Utilities, Power, Gas, and Water Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=625129

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Fitch Ratings
Primary Analyst
Lindsay Minneman, +1-212-908-0592
Associate Director
Fitch Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Glen Grabelsky, +1-212-908-0577
Managing Director
or
Committee Chairperson
Ralph Pellecchia, +1-212-908-0586
Senior Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

Source: Fitch Ratings