FPL's ratings reflect the predictable nature of cash flows from regulated electric operations, a favorable 2012 rate order that provides for at least four years of regulatory certainty, recovering electric sales in its service territory after a prolonged trough, management focus on O&M cost containment that is expected to drive returns close to the upper end of the authorized ROE range, and a strong balance sheet and liquidity profile. The ratings also reflect high capex investments over 2014-2016 as the utility spends on new generation and other infrastructure improvements.
KEY RATING DRIVERS:
Base Rate Increases: The outcome of FPL's 2012 base rate case filing was quite constructive, in Fitch's opinion. In addition to a
Recovering FL Economy: A recovering
High Capex: Fitch expects FPL to spend over
Robust Credit Metrics: FPL's forecasted funds from operations (FFO) credit metrics are expected to weaken from their current robust levels as benefits from bonus depreciation subside. Fitch expects the FFO fixed-charge coverage to be in the 7.0x - 9.0x range over the forecast period. The FFO adjusted leverage and adjusted debt/EBITDAR are expected to be 3.0x and 2.4x, respectively, by 2016. These metrics are quite robust compared to the 'A' rated financial profile for a regulated utility.
Positive or negative rating actions for FPL look unlikely at this time. However, downward rating pressure could result from:
--Changes to Florida Regulations: Unfavorable changes in current
--Increasing Parent Risk Profile: If FPL's parent, Nextera Energy, Inc.), increases its debt leverage or changes its corporate strategy such that its risk profile materially worsens, it could adversely affect FPL's ratings consistent with Fitch's Parent and Subsidiary Rating Linkage Criteria.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage' (
--'Recovery Ratings and Notching Criteria for Utilities' (
--'Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis' (
--'Rating U.S. Utilities, Power and Gas Companies' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Recovery Ratings and Notching Criteria for Utilities
Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit Analysis
Rating U.S. Utilities, Power and Gas Companies (Sector Credit Factors)
Source: Fitch Ratings
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