PrefBlog

DBRS has announced that it:

changed the trend for all ratings of Fortis Inc. (Fortis) to Positive from Stable and confirmed the ratings as listed below. The Positive trends reflect (1) a significant reduction of nonconsolidated corporate debt following the sale of a 51% interest in the Waneta Hydroelectric Expansion (the Waneta Expansion) and the $1.2 billion common equity issuance in December 2019, (2) solid consolidated credit metrics in 2019 and expected solid consolidated metrics in the near-to-medium term, and (3) a continued strong business risk profile at regulated utilities. The current ratings take into account Fortis’ structural subordination and mitigation factors such as the diversification of regulatory jurisdictions and the size, stability, and sustainability of cash flow.

The confirmations incorporate DBRS Morningstar’s expectation that the ongoing Coronavirus Disease (COVID-19) pandemic will not have a material impact on Fortis’ operations and its major capital projects, as well as its 2020 credit metrics. Most of Fortis’ assets are essential services and are extremely important to maintain the continual economic activities and social and health safety. The coronavirus pandemic is not expected to significantly affected Fortis’ volume distributions as most of Fortis’ regulated utilities either benefit from deferral accounts or decoupling, which significantly reduces the impact of volume volatility. Capital project executions are not expected to experience significant delays at this time but they could face some delays if the coronavirus-related restrictions continue for a longer period of time, and in that case, capital expenditure (capex) is expected to shift to subsequent years of the 2020–24 capex plan. DBRS Morningstar expects any potential cost overruns can be recovered through regulatory applications because the costs are beyond management’s control and expectation.
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DBRS Morningstar would upgrade Fortis to A (low) if (1) it can maintain its current business risk profile through this challenging period and the macro environment stabilizes; and (2) Fortis can keep its consolidated metrics stable around the current levels, as well as sustain its nonconsolidated debt-to-capital and cash flow-to-nonconsolidated debt ratios in the low-20% range and at least 12.5%, respectively.

Affected issues are FTS.PR.F, FTS.PR.G, FTS.PR.H, FTS.PR.I, FTS.PR.J, FTS.PR.K and FTS.PR.M.

This entry was posted on Monday, May 4th, 2020 at 10:24 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.