Fitch lowers outlook for American Electric Power subsidiary

Fitch Ratings said it affirmed the ratings of American Electric Power Co., Inc. and its eight regulated electric utility subsidiaries and changed the outlook for one of those subsidiaries, Ohio Power Co., to negative from stable. The outlook for the remaining companies is stable.

AEP has a BBB long-term issuer default rating and an F2 short-term issuer default rating, and the agency rates its senior debt at BBB and its junior subordinated debt at BB+. Ohio Power has a BBB+ long-term issuer default rating and an F2 short-term issuer default rating, and Fitch rates its senior debt at A- and its pollution control revenue bonds at A-.

The negative outlook on Ohio Power reflects the challenging operating environment in Ohio, the agency said. The Public Utility Commission of Ohio decided last week to revoke the stipulation agreement on Ohio Power's electric security plan that it had approved just two months earlier.

Fitch considers it likely that the commission would still require AEP's Ohio operations to move to a competitive pricing market for generation. The uncertainty, though, is how the transition would now be planned and the extent to which it would negatively impact Ohio Power's cash flows, the agency said.

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