NEW YORK Aug. 22, 2006--Standard & Poor's Ratings Services said today that its ratings on electric distribution utility Commonwealth Edison Co. (ComEd; BBB+/Watch Neg/A-2) and its parent, Exelon Corp. (BBB+/Watch Neg/A-2), remain on CreditWatch with negative implications.
Standard & Poor's also assigned its 'A-' rating and '1' recovery rating to Commonwealth Edison's $300 million first mortgage series 104 bonds due 2016. The rating was placed on CreditWatch with negative implications. All the ratings on ComEd and its parent Exelon are on CreditWatch with negative implications.
The net proceeds from the sale of the bonds will be used to refinance commercial paper and for general corporate purposes.
The ratings on ComEd and its parent Exelon were placed on CreditWatch with negative implications in December 2004 after Exelon announced its intention to merge with lower-rated Public Service Enterprise Group Inc. (BBB/Watch Dev/A-3). The merger must still be approved by the New Jersey Board of Public Utilities.
Exelon has called a board of directors meeting to discuss whether to proceed with merger negotiations.
Even if Exelon decides to cancel the merger, Standard & Poor's would keep its ratings on ComEd on CreditWatch with negative implications.
"This is because we are concerned that future regulatory or legislative decisions in Illinois after the power-procurement bidding process takes place after 2006 may result in the significant underrecovery of supply costs, a lengthy recovery of cost deferrals, or both," said Standard & Poor's credit analyst Jeanny Silva.
"If ComEd is unable to fully recover its supply costs on a timely basis, its stand-alone cash flow protection and leverage ratios could weaken considerably," said Ms. Silva.
Standard & Poor's also said that if the gap in credit profiles between stand-alone ComEd and Exelon widens, it would reevaluate ratings equalization.
"This is true especially in light of Exelon's numerous indications that, while it may be financially able to support ComEd, it would be unwilling to do so if ComEd is unable to fully recover its supply costs," said Ms. Silva.
|