S&P rates PSEG notes BBB

S&P said it assigned a BBB rating to Public Service Enterprise Group Inc.'s (PSEG) $700 million senior unsecured notes, which is comprised of two tranches due in 2019 and 2021.

The rating reflects the fact that the notes are senior unsecured and disadvantaged by the existence of material priority obligations and liabilities at PSEG's operating subsidiaries, Public Service Electric & Gas Co. and PSEG Power LLC.

The proceeds will be used for general corporate purposes, including redeeming outstanding commercial paper, S&P said.

The company’s BBB+ issuer credit rating and stable outlook are unaffected.

PSEG's regulated utility operations benefit from a transparent and stable regulatory framework in New Jersey, as well as growing Federal Energy Regulatory Commission-regulated transmission investments, the agency said.

The company's merchant generation operations have higher business risk than its utility operations due to the inherent cash flow volatility of the unregulated merchant power industry, S&P said.

While PSEG's credit protection measures are expected to weaken somewhat over time, the growth of the regulated utility operations should offset some of that weakness and provide stability to the company's credit profile and ratings, the agency said.

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