Fitch Rates Exelon Generation's Senior Notes 'BBB+'
NEW YORK-(Business Wire)-September 17, 2009 - Fitch Ratings has assigned a 'BBB+' rating to Exelon Generation Company, LLC's (Exgen) $1.5 billion senior notes. The senior note offering included $900 million 6.25% due 2039 and $600 5.2% due in 2019. Proceeds from the offering will be used to fund cash tender offers for the company's $700 million 6.95% senior notes due 2011 and through a distribution to its parent Exelon Corp. (EXC), $500 million 6.75% EXC senior notes due 2011 and for general corporate purposes. The Rating Outlook is Stable.
The rating reflects the strong competitive position of Exgen's largely nuclear-fueled electric generating portfolio, an exceptionally strong balance sheet and substantial liquidity that provides protection against capital market dislocations. The ratings and Stable Outlook also anticipate a decline in cash flow through 2010, reflecting Fitch's expectation of lower power prices and reduced electric demand as well as a rise in capital expenditures associated with the company's nuclear uprate program.
The outlook for lower power prices is partly offset by the company's hedging strategy and cost reduction initiatives. Nearly 90% of 2010 and approximately 60% of 2011 expected generation is hedged through forward sales of power, options and swaps. In addition, Fitch expects cash flow to benefit from the 2010 expiration of a below market contract with affiliate PECO Energy Co. which recently completed an auction for a portion of its 2011 supply needs; the winning bid was approximately $101/MWh, well above the price in the existing contract with Exgen. (Exgen was one of a number of winning bidders.) Even with the expected decline in cash flow and other financial measures, the company's financial profile is expected to remain sound and superior to its peer group.
The nuclear uprate program is designed to add between 1,300 MW and 1,500 MW of new capacity over the five-year period 2012 - 2017. The estimated cost of the uprate program (nominal dollars) is approximately $4.4 billion, which compares favorably to the cost of adding a new nuclear unit of roughly comparable size.
The pending tender offers for Exgen and EXC debt issues maturing in 2011 are part of EXC's liability management program. The program is designed to address and extend debt issues maturing within the next several years well in advance of their maturity dates to assure capital market access and to take advantage of presently favorable market conditions. Fitch considers the plan to be supportive of credit quality.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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