EMA Downgraded to P-3(high) by S&P

Standard & Poor’s has announced:

  • Halifax, Nova Scotia-based utility holding company Emera Inc. has closed on the sale of its Emera Maine subsidiary to ENMAX Corp.
  • Although we expect the sale to improve Emera Inc.’s consolidated financial measures in the near term, the transaction does not fully mitigate other factors that weigh on the company’s credit quality, including our expectation that the company’s funds from operation (FFO) to debt will be consistently above 12%.
  • As a result, we no longer expect Emera to maintain its financial measures at the upper end of its financial risk category, removing support for our use of a positive comparable ratings analysis modifier.
  • Therefore, we are lowering our issuer credit rating on Emera to ‘BBB’ from ‘BBB+’. The outlook is stable.
  • At the same time, we are lowering the senior unsecured debt rating to ‘BBB-‘ from ‘BBB’, subordinated notes rating to ‘BB+’ from ‘BBB-‘, and preferred shares rating to ‘BB+’ from ‘BBB-‘ on the global scale and to ‘P-3 (High)’ from ‘P-2 (Low)’ on the Canada National Scale ratings.
  • We are also downgrading intermediate holding company TECO Energy Inc. (TECO) and financing company TECO Finance Inc. to ‘BBB’ from ‘BBB+’.
  • We also reviewed our ratings on operating subsidiaries Nova Scotia Power Inc. (NSPI) and Tampa Electric Co. (TEC) and conclude that the cumulative value of the structural protections in place between these two operating companies and parent Emera are sufficient to insulate our issuer credit rating on both entities for up to one notch from the group credit profile of parent Emera.
  • As such, we are affirming our ratings on NSPI and TEC, including the ‘BBB+’ issuer credit ratings.
  • For NSPI, we are affirming the A-1 (Low) Canadian National Scale Commercial Paper Ratings.
  • For TEC, are affirming the ‘A-2’ short-term ratings.
  • The stable outlook on all these entities largely reflects our expectation that Emera will maintain its financial measures, including FFO to debt at about 11% over the next two years.

We could downgrade Emera over the next 12-24 months if the company’s financial measures deteriorates with FFO to debt of below 10% with no prospect for improvement. This could happen if there are material adverse regulatory outcomes, a material delay in the completion of capital projects, or if the COVID-19 pandemic persists and has a material long-term impact on the company’s financial measures.

We could raise ratings on Emera if its financial measures improve with FFO to debt approaching 13% on a sustained basis, indicative of the higher end of the financial risk profile category.

Affected issues are EMA.PR.A, EMA.PR.B, EMA.PR.C, EMA.PR.E, EMA.PR.F and EMA.PR.H.

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