Fitch expects the outcome of DP&L’s electric security plan to “adversely affect” the companies’ credit profiles.
The firm expects the electric security plan will establish a timeline for DP&L to transfer its electricity generating assets to a non-regulated affiliate under a corporate separation order.
A lower credit rating could make it more expensive for DLP and DP&L to borrow money.
Ratings of DPL and DP&L are linked and the issuer default ratings of both companies considers the combined leverage, which includes about $1.5 billion of debt at DPL and $900 million of debt at DP&L.
Following the separation of its generation assets, DP&L will be a “significantly smaller, but lower risk wires-only utility,” Fitch said. However, the new capital structure of DP&L will be a significant factor in its ultimate ratings along with the credit profile of its parent, DPL.
DP&L has a $470 million debt maturity rating of first mortgage bonds on Oct. 1, representing more than 50 percent of the company’s existing debt outstanding. Given the eventual separation and resulting release of rate base assets, refinancing terms and conditions may be less favorable, Fitch said.
Fitch expects to resolve the ratings watch for DPL and DP&L once the outcome of the electric security plan is known. Fitch expects the Public Utility Commission of Ohio could issue a final order by mid-July.
Parent company AES Corp. acquired DPL in late 2011 for $4.7 billion, including $1.2 billion of DPL debt.
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