Fitch: PSEG Power view to negative

Fitch Ratings said it affirmed the long-term issuer default ratings of Public Service Enterprise Group, Inc. (PSEG) and PSEG Power LLC at BBB+, along with the issuer default ratings of Public Service Electric & Gas Co. (PSE&G) at A-.

The outlook is stable for PSEG and PSE&G, but the agency said it revised the outlook on PSEG Power to negative from stable.

PSEG also has a senior unsecured debt rating of BBB+, short-term issuer default rating of F2 and commercial-paper rating of F2.

PSE&G has a senior secured debt rating of A+, pollution control revenue bonds rating of A+, short-term issuer default rating of F2 and commercial-paper rating of F2.

PSEG Power has a senior unsecured debt rating of BBB+.

The negative outlook revision is due to an expectation that credit-protection measures will weaken over the next several years due to a more aggressive capital expenditure plan at PSEG Power, while EBITDA is pressured by weak merchant power prices and sluggish demand, Fitch explained.

Given PSEG Power's plan to invest $2 billion to expand its generation capacity, the amount of incremental debt issued over the next 12- to 18-months will be a key factor in resolving the negative outlook, the agency said.

Fitch said it expects PSEG Power's debt-to-EBITDA ratio to weaken to 2.8x by year-end 2018, compared to 2.4x for the 12-months that ended June 30.

The potential for further deterioration also persists if energy prices or capacity revenues fail to recover, the agency added.

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