On Wednesday, Fitch Ratings made a similar move, citing “significantly reduced” financial expectations, lower revenues and rising competition.
A spokeswoman for DPL could not be reached for comment Friday.
The lower credit ratings could make it more expensive for DPL and DP&L to borrow money.
The ratings downgrades followed AES’s earnings report on Wednesday. The Arlington, Va.-based company reported a much steeper third-quarter loss tied in part to its $1.8 billion charge on DPL.
AES announced the charge Nov. 1, citing declining market price for energy, a significant increase in the number of customers swithing to other suppliers, and uncertainty about the outcome of regulatory proceedings.
AES acquired DPL late last year for $4.7 billion, including $1.2 billion of DPL debt.
S&P lowered the credit ratings of DPL and DP&L to BB from BBB-. Fitch lowered the ratings to BB from BB+.
The ratings firm said DPL and DP&L are at greater risk because of “the increased competition among Midwest energy retail providers and the expected growth of the unregulated retail business.”
“In addition, we expect competition to increase because of lower wholesale electricity prices, which will materially reduce DPL’s profit margins,” S&P said. “The company’s financial position has very little cushion due to the increased amount of acquisition debt from parent company AES.”
Still, DPL has adequate liquidity and its ratings outlook is stable, S&P said.
Fitch said DPL’s credit metrics “have sharply deteriorated” as many of its customers have switched to other suppliers and wholesale revenues have fallen.
A ratings upgrade is unlikely for “several years given the highly leveraged balance sheet at DPL and the structural change in the operating environment facing DP&L,” Fitch said.
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