S&P turns Essential outlook to negative

S&P said it revised its outlook for Essential Utilities Inc. and its subsidiaries Aqua Pennsylvania Inc. and PNG Cos. LLC to negative from stable.

“The negative outlook reflects the company's weak financial measures and the possibility that they will remain below our downgrade threshold for the current rating. Since 2020, Essential's FFO to debt has remained consistently below our 12% downgrade threshold. The company's historical underperformance reflects its 2020 acquisition of its natural gas operations, which increased its leverage and weakened its financial measures.

“More recently, Essential's financial measures have been negatively affected by headwinds stemming from the Covid-19 pandemic, its stay-out-of-gas rate cases in Pennsylvania, its robust capital spending, and inflationary pressures, including higher operating costs,” S&P said in a press release.

The agency warned it could downgrade the issuers over the next 24 months if its consolidated FFO to debt stays below 12%.

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