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HomeMy WebLinkAbout20180720Avista Standard and Poors Update.pdfI Avista Corp. 1411 East Mission P.A.Box3727 Spokane, Washington 99220-0500 Telephone 509-489-0500 TollFree 800-727-9174 RECEIVED ?0lB JU!- 20 Alt 9: 116 -.r -r a- JiLl\J .. ., il'Ii,il'i!SSl0ND T July 19,2018 Diane Hanian, Secretary Idaho Public Utilities Commission Statehouse Mail W. 472 Washington Street Boise, Idaho 83720 RE: Joint Application of Hydro One Limited and Avista Corporation for Order Authorizing Proposed Transaction Docket Nos. AVU-E-17-09 and AVU-G-17-05 / Standard and Poors Update Released on July I 8, 201 8 Dear Ms. Hanian: As promised in our July 18, 2018 letter regarding the recent developments involving Hydro One's CEO and board of directors, this letter provides a further update on events related to the changes to Hydro One's management. Attachment A is an update from Standard and Poors, which (a) maintains the credit watch negative reflecting the potential for a one notch downgrade to Hydro One Limited's (HOL) current credit rating because of the Avista transaction, and (b) notes the possibility that HOL's governance structure could result in an additional one-notch downgrade, if it concludes that recent developments adversely affect management decision-making and fail to promote the interests of all stakeholders. Sincerely Kevin J. Christie Vice President, External Affairs and Chief Customer Officer Avista Corporation a & Chief Legal Officer One Limited Attachments: Attachment A: S&P Update of July 18, 2018 Cc: all parties 2lP age CERTIFICATE OF SERVICE I HEREBY CERTIFY that I have this 19th day of July, 2018, served the foregoing letter regarding an Update on Recent Events in the Merger Case Nos. AVU-E-17-09/AVU-G- 17-05, upon the following parties, by sending a copy via electronic mail. Diane Hanian, Secretary ldaho Public Utilities Commission 47 2 W . Washington Street Boise, lD 83720-5983 diane. hanian@ouc. idaho.oov Brandon Karpen Deputy Attorneys General ldaho Public Utilities Commission 472W. Washington Boise, lD 83720-0074 brandon. karpen@puc. idaho.qov Danielle Franco-Malone Schwerin Campbell Barnard lglitzin & Lavitt LLP 18 W. Mercer St., Suite 400 Seattle, WA 98119 franco@workerlaw.com Larry Crowley The Energy Strategies lnstitute, lnc. 5549 S. Cliffsedge Ave Boise, lD 83716 crowlevla@aol.com Dr. Don Reading 6070 Hill Road Boise, lD 83703 dreadino@mindsprinq.com Norman M. Semanko Parsons Behle & Latimer 800 West Main Street, Suite 1300 Boise, ID 83702 NSemanko@parsonsbehle.com ecf@parsonsbehle.com Brad M. Purdy Attorney at Law 2019 N 17th Street Boise, lD 83702 bmpurdv@hotmail.com Peter J. Richardson Richardson Adams PLLC 515 N.27th Street Boise, lD 83702 peter@ richardsonadam s. co m Ronald L. Williams Williams Bradbury, P.C. P. O. Box 388 802 W. Bannock St., Suite 900 Boise, lD 83702 ron@will bury.com Ben Otto ldaho Conservation League 710 N. 6th St. Boise, lD 83702 botto@ idahoconservati on. orq Dean Miller 3620 E Warm Springs Ave Boise, lD 837'16 Dea n i m i I Ier@ca blesne. neJ Paul Kimball Sr. Regulatory Analysist 4 S&P Globat Ratings Research Hydro One Ltd., Hydro One Inc. Ratings Remain On CreditWatch Negative Following CEO Exit And Board Resignation Prirnsry Crcdit Anslyst: Andrew Ng, Toronto + I (416) 507 2545; andrerrng@spglobal.com Sacondery Contacts: Vinod Maklar, CFA, Toronto + 1 (416) 507 3271: vinod,makkar@spglobal.com Obioma Ugbo{a, New York + I (212) 438 7406; obioma.ugboqja@spglobal.com . Toronto-baeed xydro One Ltd. (HOL) recently announced Lhe retirement of its chief execuEive officer (CEO). effective immediately, and the resigaaLion of its encire board of direcE,ors on or prior to Aug, 15, 2019.t Our baae case conEinueE to reflect t.he likeLihood that HOL's pending transacEion vith Avista Corp. wil-J- close.. Ilorrevet, Ehe CEO'g departure and pendiog resignation of Ehe enErre board create uncertainEy regarding the effectiveneEs of HOL,E governance Btructure, parEicularly tiEh reEpect to Ehe influence on managemeAE decision-making and promoting Ehe interesLs of alL stakeholdere.. As a reeult, ye are updating our Creditlilateh negative placement. on lIOt and Hydro One Inc., Eo reflect the governance developmentE and the potenEial for up to a bwo-notch downgrade of both entities and cheir rated debt.r The Creditwatch placement now lncorporaEes Che risk of a one-notch dotrrrgrade relaEed to the Avista transaction closing, and the poeeibility thaE Ehe company' 9 governance EE,ructure could resulE in an additional downgrade. Overa11, Ehese dj-sElncE developments could collectively result. in a two-notch downgrade from our currenb ratings on boch entllies and the raued debt. TORONTO (SeP Global Ratings) ,Ju1y 18, 2018--S&P Global RaEings today stated Ehat its tAt ratings on ToronEo-based Hydro One Ltd, (HOL) 6p6 Hydro One Inc uur.SflIDrrDArmools.coll O S&P olobal R!hBB Atl nthlr,eFycd No n{r*r or dilcemimtbn vi$od S&P Olobal Ratm8 ' pemisim. Se Tm d Urc/Disc{airo m rlp tal pagE JULY 18, rolE I 207X78F Attachment A Page 1 of4 - Hydro One Ltd-, Hydro One Inc. Ratings Remain On Cred.itVatch Negatiue Pollouing CEO Exit And Board Resigtati<m (HOI) remain on Creditwatch wi-th negative implicaEions, where rhey were placed June 15, 2018. The Creditllatch placemenL on HOL and HOI continues to reflect the likelrhood of a one-notch downgrade to both companies because of Ehe Avista tranBaction, This reflects the extent. of the regulatory settlements and approvals thus far, supporLing our expecLation Lhat the pending transactj.on with Avieta wiLl c1ose, In addition, E.he Credibwatch now incorporates Ehe possibility that HOL's governance sLructure coul"d resulc. in an addiEional one-notch dovrngrade. if we conclude thaI recenE. developments adveree]y affecE managemenE decision-making and fail Lo proaote the interests of all stakeholders. Overall, Lhese distincc developmencs could collecEively reeulL in a two-notch downgrade from our currer'rt credit ratings on boEh enEiEies. we wiII resolve the CrediLwaLch lrhen Ehe Eransaction wi[.h Avlsta c]oses, and after our review of che companyrs governance sE.rucE.ure. including our evaluab.ion of iEs effectiveness in prorroting the interests of all stakeholders, RELATED CRIIER]A. Criteria - Corporates - General r Reflecting Subordination Risk In CorporaE.e fssue RaLings, March 2A, 2ol.8r General Criteria: Methodology For Linking Long-Term And Short-Term Ratings . April 1, 2017 . General Criteria: Guarantee Criteria, Occ. 21, 2016 . General Criteriar Rating GovernmenL-RelaLed Entities: MethodoloEy And Assumptions, March 25, 20].5 r Criteria - Corpolates - General: MeEhodology Ard AseumpEions: LiquidiLy DescripEors For Global Corporate Iasuers. Dec. 16, 2014 . ceneral CriE.eria: l'lethodology: Industry Risk, Nov. 19, 2013 r General Criteria: Country Risk AseessmenE l\reEhoalology And Assumptions, Nov. 19 , 201"3r Criteria - Corporates - Utilitiee: Key CrediE Eact,orE For The Regul-aEed UtiliEies fndustry, Nov. 19, 2013 o Criteria - Corporates - General: Corporate MeE.hodology: Ratios And Ad3usL.ments, Nov. L9, 2OL3 r Criteria - Corporateg - General: Corporate MeEhodology. Nov, 19, 2013. General CriLeria: Group RaLing MeEhodology, Nov. L9, 2Ol3 . General CriEeria: t4echodology: Hanagement And Governance Credic Factors For CorporaLe EntiL.ies And rnsurers, Nov. 13, 2Oa2 . General CriLeria: Use Of ereditHaE.ch And Outlooks, SepE. 14, 2009 CerEain Eerms used in Lhj.s report, parLj.cularJy certain adjectives used Eo express our view on rating relevant. facEors, have speeific meanings ascribed Eo Ehem in our criteria, and should Lherefore be read in conjunction wiEh such criteria. Please see Ratings Criteria at wuld.standardandpoors.com for furE.her w'W.W, ETAI{DARDATDP OONS.CO }'JULY 18, t0l0 3 @ S&P Global Reljngs All rishrs resprued No repanl or d6,leminalion withrut S&P Clohal Ratin8s'pemi$ion. Sre 'l emB of U,re/ljisclElmer on $e ]81pagc 2[73789 Attachment A Page 2 ol 4 Hydro One Ltd., Hydrct One Inc.. Ratings Remain On CreditVatch Negatfue Folbating CEO Exit And Boad Resigtution informat,ion. CompleEe ratings information is availa-b1e to eubscribers of RatingsDirect aE www,capitaliq.com, A11 ratings referenced herein can be found on S&.P Global RaLings' public website at wErr.Etandardandpoors.com. Use t,he Ratings search box LocaEed in the left column- W*.w. 8?Af, DARDAI{DSOORE.CO U @ S&P Glohl fuaings. All riShts rcreryed No reprjnt o dj6reDjnation without S&P Globel Ratings' permision. see Tm of UE/Di8clai]H on rhe lffit page, ,uLI 18, 'Ol8 X 2073789 Attachment A Page 3 of 4 Copyright @ 2018 Standard & Poois Financial Seruices LLC, AJI rights reserved. 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