Fitch cuts AEP Texas

Fitch Ratings said it trimmed AEP Texas Inc.’s issuer rating to BBB from BBB+.

The agency attributed the downgrade to weaker credit measures due to lower equity capitalization and lower than forecasted parent capital contributions. The downgrade also considers and continued high capital expenditures and regulatory lag as a result of significant service territory growth.

Concurrently, Fitch revised the outlook for American Electric Power Co. Inc. and its subsidiary Ohio Power Co. to negative from stable.

“The negative outlooks at AEP and OPCo reflect expected credit metrics that are outside of stated downgrade thresholds. Additionally, other AEP subsidiaries have limited to no headroom at the current rating levels. Fitch expects AEP will take necessary actions like capex reductions, capital rotation or equity funding to return metrics to within the stated thresholds. Absent such measures, negative rating actions are likely,” the agency said in a press release.

Fitch affirmed AEP’s BBB+ issuer and senior unsecured ratings and OpCo’s rating at A-.

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