From Moody's via Research Recap:
Costs associated with new emission controls and updating of an aging infrastructure pose a long-term threat to the outlook for US electric power companies, according to a new industry analysis from Moody’s.
The US investor-owned electric utility sector’s rating outlook remains stable, but credit quality could deteriorate if companies don’t strengthen their balance sheets to withstand rising business and operating risks, Moody’s says in its latest six-month update for the sector.
“The fundamentals underlying the U.S. investor-owned utility sector remain intact,” said Moody’s Vice President Jim Hempstead, author of the report. “The most important of these is the relative supportiveness of the regulatory environment, and state regulators continue to authorize timely financial relief for prudently incurred costs and investments, a primary driver behind our stable outlook.”
Managing these regulatory relationships and financing significantly large capital expenditure plans with a balance of both debt and equity will be crucial for credit ratings over the longer–term horizon, says the report. Pressures are building with rising operating costs, especially for fuel commodities, and a significant need to invest capital into an aging infrastructure....MORE