A corporate credit rating firm on Monday maintained its negative rating for DPL Inc. and its electricity utility, the Dayton Power & Light Co., because of pending regulatory restructuring.
Fitch Ratings issued the negative rating in November following news that parent AES Corp. had taken a $1.8 million charge against DPL.
Fitch expects the outcome of DP&L’s electric security plan to “adversely affect” the companies’ credit profiles.
The proposed electric security plan calls for a transition to competitive market-based auctions to meet the electric needs of customers by 100 percent by June 2016. The proposal includes a $120 million annual “service stability rider” that would lower bills for larger users like businesses and utilities, but amount to a monthly $5 charge for typical households.
Fitch expects the electric security plan will establish a timeline for DP&L to transfer its electricity-generating assets to a non-regulated affiliate under a corporate separation order.
A DPL spokeswoman did not respond to a request for comment Monday.
A lower credit rating could make it more expensive for DLP and DP&L to borrow money.
Ratings of DPL and DP&L are linked and the ratings of both companies considers their combined debt, which includes about $1.5 billion at DPL and $900 million at DP&L.
Following the separation of its generation assets, DP&L will be a “significantly smaller, but lower risk wires-only utility,” Fitch said. However, the new capital structure of DP&L will be a significant factor in its ultimate ratings, along with the credit profile of its parent, DPL.
DP&L has a $470 million in mortgage bonds maturing on Oct. 1. The amount represents more than 50 percent of the company’s existing debt. Given the eventual separation and resulting release of assets, refinancing terms and conditions may be “less favorable,” Fitch said.
Fitch expects to end the ratings watch for DPL and DP&L once the outcome of the electric security plan is known. Fitch said the Public Utility Commission of Ohio could issue a final order by mid-July.
AES Corp. acquired DPL in late 2011 for $4.7 billion, including $1.2 billion of DPL debt.
This newspaper was the first to report Fitch’s rating change for DPL Inc. and Dayton Power & Light Co. in November. We will continue to cover this story through its completion.