EMA.PR.A: S&P Assigns Outlook Negative

Standard & Poor’s has announced:

  • We are revising our outlook on Emera Inc. to negative from stable
  • At the same time, we are affirming our ratings, including our ‘BBB+’ long-term corporate credit rating, on the company.
  • We base the outlook revision on our view of Emera’s weak cash flow strength that is not likely to improve, but could worsen.
  • This expectation reflects a meaningful capital expenditure program due to energy policies at both the federal and provincial level.
  • This will likely drive the need for numerous rate increases that we believe heightens regulatory risk in the Nova Scotia market.
  • The ratings reflect our opinion of the company’s strong business risk profile and significant financial risk profile.

The negative outlooks on both Emera and NSPI reflect our expectation of the heightened regulatory risk due to the potential upward pressure on rates due to expected development projects that the company is pursuing and the impact on cash flow. We believe it is possible that the company could suffer near-to-medium-term deterioration in its credit metrics. This will depend in part on the regulatory response to the capital projects, the timing of the projects’ capital deployment, and the capital structure management uses. We expect Emera to maintain an [funds-from-operations]-to-total debt of more than 12% and debt-to-EBITDA equal to or less than 6x. We could take a negative rating action if we expect the company to breach this target on a sustained basis or invest in assets with greater earnings variability or business risk; or if it does not continue to exhibit stable operating performance. Conversely, although we do not expect it during our two-year outlook horizon, we could take a positive rating action if the company adopts a more conservative financial policy.

EMA.PR.A was deleted from TXPR in July, 2011.

EMA.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

One Response to “EMA.PR.A: S&P Assigns Outlook Negative”

  1. […] This follows a similar announcement from S&P. […]

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