Fitch affirms Otter Tail

Fitch Ratings said it affirmed the long-term issuer default rating of Otter Tail Corp. at BBB- and the long-term issuer default rating of its regulated electric utility subsidiary, Otter Tail Power Co., at BBB.

The outlook is negative.

The issuer default rating of BBB- considers the company's unusual business portfolio including a relatively small electric utility and a mix of small cyclical industrial businesses that operate in fragmented and competitive markets, according to the agency.

The ratings reflect the company's depressed earnings, higher leverage and large capital expenditure program, the agency said.

The ratings reflect the company's constructive outcome from Minnesota general rate case in 2011, stable cash flows and strong earnings from its regulated utility, moderate leverage and strategic redeployment of capital into the regulated utility, which lowers business risk, Fitch said.

The company's debt to EBITDA rose to 3.83x from 3.45x in 2008.

The ratings also reflect some modest ring-fencing of the utility subsidiary from its parent and other affiliates, a factor that reduces but does not eliminate linkage between the ratings, the agency said.

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