Posted 5/29/2009 04:07 pm
Updated 11 months ago
Fitch Ratings has revised its rating of Southwest Electric Power Co. from stable to negative.
"The negative outlook reflects a protracted period of lower cash flows because of higher interest and operating expenses and elevated levels of debt to fund new generation capacity," Fitch said.
Fitch cited the construction of the 480-megawatt natural gas-fired Stall unit in Shreveport, scheduled to be operational in mid-2010, and the 600-megawatt coal-fired Turk plant in Hempstead County, which landowners and environmentalists are opposing. That plant had been scheduled to be online in 2012.
Fitch Ratings affirmed Swepco's ratings as follows:
- Issuer Default Rating at BBB,
- -Senior Unsecured Debt at BBB+, and
- Preferred Stock at BBB.
About $1.5 billion in debt is affected.
"Cash flows will also be affected by considerable pension funding obligations in 2010 and 2011," Fitch said.
Construction of the Stall plant is projected to cost about $385 million. Construction of the John W. Turk plant is expected to cost $1.6 billion, with Swepco's share coming in at $1.2 billion. The Turk plant is jointly owned by Swepco, the Oklahoma Municipal Power Authority, the East Texas Electric Co-op Inc. and the Arkansas Electric Cooperative Corp.
In February, Swepco asked the Arkansas Public Service Commission for a $53.9 million base rate increase to cover $25.3 million of costs for infrastructure and operating costs and $28.6 million to recover financing costs linked to its construction of the Turk and Stall plants. Several groups, including the Sierra Club and the Audubon Society, are opposing the rate increase.