S&P rates FirstEnergy Pennsylvania BBB

S&P said it assigned BBB ratings to newly formed FirstEnergy Pennsylvania Electric Co. (FE-PA),which combines FirstEnergy Corp.’s Pennsylvania-regulated utilities Metropolitan Edison Co., West Penn Power Co., Pennsylvania Electric Co. and Pennsylvania Power Co. The new company also assumed their debt. The outlook is positive.

The agency also withdrew its issuer credit ratings on the former Pennsylvania utilities.

The issue-level debt ratings on FE-PA are unchanged, including the BBB ratings on the senior unsecured debt and the A- ratings and 1+ recovery ratings on the first mortgage bonds that were originally sold by West Penn Power and Pennsylvania Power.

“Under our base case forecast, we project FFO to debt to average about 20%. Our base case assumes the continued use of existing regulatory mechanisms, capital spending averaging about $750 million-$800 million annually, the company being mostly a cash taxpayer starting in 2025, transmission asset sale proceeds of $1 billion-$1.5 billion, and dividend payments geared toward maintaining the company's regulated capital structure,” S&P said in a press release.

The positive outlook reflects the positive outlook on parent FirstEnergy and a forecast that FE-PA's stand-alone funds from operations to debt will reflect 20%, the agency said.

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