NEW YORK, April 25, 2003 -- The ratings trend for the U.S. investor-owned utility industry (electric, gas, pipeline, and water companies) began the year on an overwhelmingly negative slope, according to a report published today by Standard & Poor's Ratings Services.
The actual number of rating changes in the first quarter actually accelerated dramatically over the changes in the year-earlier first quarter. There were an unprecedented 50 downgrades among holding companies and operating subsidiaries, compared with just three upgrades during the first three months of 2003.
"Familiar themes continue to dominate the bleak credit picture," said Standard & Poor's credit analyst Barbara Eiseman. "These include increasingly leveraged balance sheets and an overall erosion in financial profiles, constrained access to capital markets as a result of investor skepticism over accounting practices and disclosure, the plethora of federal and state investigations, failing confidence in future financial performance that has created a liquidity crisis for some companies, and investments outside the traditional regulated utility business, principally merchant generation facilities and related energy marketing and trading activities."
Standard & Poor's also said that some companies are dramatically tempering and even unwinding their investments in unregulated businesses, such as merchant generation and the energy trading activities, midstream operations by gas distributors and pipelines, and international investments.
Nevertheless, the negative credit momentum is expected to continue in 2003, as indicated by the still very large number of negative credit outlooks and negative CreditWatch listings, although Standard & Poor's expects that the pace of the negative rating actions will moderate. Standard & Poor's does not discount the possibility of additional bankruptcy filings, however.
The report, titled "Downside Rating Trend Continues For U.S. Utilities in First Quarter" is available on RatingsDirect, Standard & Poor's Web-based credit research and analysis system.
