Fitch Ratings has assigned an 'A-' rating to The proceeds from the offering will be used to repay maturing debt and for general corporate purposes. The Rating Outlook is Stable. PG&E is the primary operating electric and gas utility subsidiary of
KEY RATING DRIVERS
--The effect of unrecoverable costs and fines related to the
--The ability of management to regain the confidence of its core constituencies in the wake of the
--Future regulatory proceedings including PG&E's 2014 general rate case (GRC) and 2015 gas transmission and storage (GT&S) rate proceedings;
--Effective execution of PG&E's large capital program.
PG&E's ratings and Stable Outlook reflect Fitch's expectation that the financial impact of future
In this scenario, Fitch estimates that PG&E's financial measures will bottom in 2013-2014 and begin to improve. In addition, Fitch assumes continued equity issuance and reasonable outcomes in pending rate cases before the CPUC and the
Notwithstanding financial pressure in the wake of the disaster, PG&E's credit metrics are expected to remain consistent with its current 'BBB+' Issuer Default Rating. Future, unexpectedly adverse regulatory developments could trigger credit rating downgrades.
Fitch estimates PG&E's EBITDA-to-interest will improve from 5x at the end of 2013 to more than 7x at the end of 2015. Similarly, debt- to-EBITDA of 3.9x in 2013 should improve to an estimated 3.5x in 2014, with further strengthening expected in 2015. These ratios are consistent with Fitch's internal targets and peer comparisons for Fitch's 'BBB+' rating category. Future downgrades could occur if projected PG&E EBITDA-to-interest expense and debt-to-EBITDA ratios were to weaken meaningfully below 5x and above 4x, respectively, on a sustained basis.
Fitch's ratings for PG&E and the utility's Stable Outlook reflect the adverse effects of ongoing, significantly higher costs being absorbed by the utility primarily to enhance pipeline safety in the aftermath of the
Fitch notes that these adverse financial effects have been partially offset by substantial equity issuance by PCG to maintain PG&E's statutory 52 percent equity ratio and authorized rate increases, including settlement of its 2011 GRC. Going forward, Fitch anticipates reasonable outcomes in PG&E's pending 2014 GRC and 2015 GT&S rate proceedings. Fitch expects an administrative law judge's proposed decision in PG&E's pending 2014 GRC will be issued in the first quarter 2014 and a final CPUC decision before mid- year, with rates retroactive to
PG&E filed its GT&S rate case in
Fitch calculates that PCG has issued approximately
The three pending OIIs examine: 1) PG&E's safety and recordkeeping for its natural gas transmission systems; 2) operation of the utility's gas transmission pipeline near locations of higher population density; and, 3) general operational practices, events and conduct by the utility that may have contributed to the
The CPUC approved PG&E's PSEP to modernize and upgrade its natural gas transmission system in
The CPUC's final PSEP decision authorized
Fitch believes the political/regulatory environment in
Revenue decoupling, regulatory balancing accounts, forward- looking test years and pre-approval of planned capital expenditures greatly reduce PG&E's exposure to regulatory lag, and operating cash flow attrition, in Fitch's opinion, and mitigate concern regarding PG&E's large capex program.
Liquidity at PG&E is solid with approximately
Fitch calculates that PG&E debt maturities during 2014-2018 will approximate
PG&E's credit metrics are consistent with the 'BBB+' rating category, based on Fitch's estimates, but may weaken if regulatory decisions are more punitive than expected. Adverse outcomes in pending San Bruno OIIs, GRC and/or GT&S rate proceedings could lead to future adverse rating actions. In addition, ineffective execution of PG&E's large capex program could lead to future credit rating downgrades. Fitch believes future downgrades would likely occur if projected EBITDA-to-interest expense and debt-to-EBITDA ratios were to weaken to below 5.0x and above 4.0x, respectively, on a sustained basis. The pending criminal investigation into the
Within the next 12 months, an upgrade is unlikely in light of the uncertainty related to the pending financial exposure anticipated in the wake of the
Additional information is available at 'fitchratings.com'.
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Fitch Ratings has assigned an 'A-' rating to
The proceeds from the offering will be used to repay maturing debt and for general corporate purposes. The Rating Outlook is Stable. PG&E is the primary operating electric and gas utility subsidiary of