Stable Outlook: The company's improved credit profile is sustainable, in Fitch's opinion. Key financial drivers include strong utility earnings, a lower cost of debt, and effective cost control. Low-risk utility operations contribute over 95% of consolidated earnings, with 80% of utility net income distributed to the parent to support parent-level funding obligations and the common dividend. The utility's financial profile is solid, in Fitch's opinion, and benefits from supportive rate treatment in
Key Rating Drivers:
-- CMS' ownership of Consumers Energy Co. (Consumers, Long-term IDR 'BBB', Stable Outlook);
-- Supportive rate treatment in
-- Large utility-centric capital plan which will increase Consumers' funding needs;
-- Highly levered consolidated capital structure, including a high level of parent debt;
-- Improving service territory demographics.
CMS Financial Metrics:
Fitch expects CMS' coverage metrics to remain at or near current levels and forecasts EBITDA-to-interest to range between 4.0 times (x) and 4.4x over the next five years. Leverage metrics reflect the high level of debt at CMS relative to peers, with debt-to-EBITDA forecast at or below 4x toward the end of the five-year forecast. Fitch considers effective cost control as key to maintaining a stable financial profile, as well as balanced rate treatment to mitigate regulatory lag at the utility during this capital intensive period.
Consolidated debt-to-capitalization, as calculated by Fitch, is high relative to peers at 69%, at fiscal year end (FYE)
Consolidated Debt Maturities:
The consolidated debt maturity schedule is manageable, in Fitch's opinion, with
Total liquidity at FYE
Consumers Credit Profile:
The utility's rating and Stable Outlook reflects a solid stand-alone financial profile, and supportive rate treatment in
The five-year nearly
Fitch looks to timely recovery of capital costs as key to maintaining credit quality during this capital intensive period, and considers the use of forward test years as well as final rate determinations within 12-months of filing as facilitators of timely recovery. Fitch's forecast includes incremental new debt as a source of capital funding over the next few years, and expects the utility capital structure will remain balanced with some equity support from the parent. Access to the debt capital markets is viewed as unrestricted by Fitch.
-- No positive rating action is currently under consideration.
-- Consolidated debt-to-EBTIDA higher than 4.5x on a sustainable basis would lead to negative rating action.
-- An adverse regulatory order that negatively impacts the utility's financial position could place not only lead to negative rating action at the utility, but also at the parent.
Additional information is available at 'www.fitchratings.com'.
-- 'Rating North American Utilities, Gas and Water Companies' (
-- 'Recovery Ratings and Notching Criteria for Utilities' (
-- 'Corporate Rating Methodology: Including Short-term Ratings and Parent and Subsidiary Linkage' (
Rating North American Utilities, Power, Gas, and Water Companies
Recovery Ratings and Notching Criteria for Utilities
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Source: Fitch Ratings
Most Popular Stories
- Top Hispanic Tech Companies Push for the Top
- 5 Notable Hispanic Technology Executives
- Russia, Crimea Discuss Referendum
- Taco Bell Rings Up Breakfast Menu
- California Establishes Center for Coffee Study
- China Urges Malaysia Flight Emergency Response
- Visa, MasterCard Team Up to Focus on Payment Security
- For Obama, a Last Stab at Improving Ties with Capitol Hill
- Sunday Starts Daylight Saving Time
- 'Holy grail of guitars' OM-45 Deluxe Available in in NY Auction