20060314Quarterly debt report.pdf

825 N.E. Multnomah St.
Portland OR 97232
- PACIFICORP
, .',. \ -::~ ~~
PACIFIC POWER UTAH POWER
- -- .. ,; .:::)j:\j., :: " \.. \ \ ::. ::. '
March 13 2006
Idaho Public Utilities Commission
472 West Washington
Boise, Idaho 83702-5983
Attn: Ms. Jean D. Jewell
Commission Secretary
Re:Quarterly Debt Report
Pursuant to Case No.AC-05-, PacifiCorp (the Company) hereby files an original and eight
copies of its debt report for the period ended December 31 2005 as well as recent write-ups from
major bond rating agencies.
Long-Term Debt Activity:
Amount outstanding at September , 2005 029 158 000
Issuances
None
Maturities
8.271 % FMBs due Oct 2010 Installment
978% FMBs due Oct 2011 Installment
8.493% FMBs due Oct 2012 Installment
797% FMBs due Oct 2013 Installment
734% FMBs due Oct 2014 Installment
294% FMBs due Oct 2015 Installment
635% FMBs due Oct 2016 Installment
8.470% FMBs due Oct 2017 Installment
340% Series E MTNs due Oct 2005
360% Series E MTNs due Oct 2005
195 000)
(259 000)
055 000)
(782 000)
235 000)
881 000)
(678 000)
(649 000)
000 000)
000 000)
Amount outstanding at December 31 2005 $4.009.424.000
Long-Term Debt Authorization:
Amount authorized May 17, 2005 by Order No. 29787 000 000 000
Issuances
June 13, 2005 issuance of 5.250% FMBs due June 2035 (300 000 000)
Remaining authorization at December 31 , 2005 $700.000.000
If you have any questions regarding this summary, please call me at [phone].
Sincerely,
IUdf
Matt Fechner
Treasury Analyst
Enclosures
.. .
Fitch1!~~~I~gs Corporate Finance
Global Power/U.S. and
Canada
Credit Analysis
PacifiCorp
Subsidiary of Scottish Power pic
RatingsSecurity Current Previous
Class Rating RatinglOR SrSec. A- Sr. Unsec. BBB+ A-
Preferred Stock BBB BBB+ "
NR - Not rated. !DR -Issuer default rating.
Rating Watch......................................................None
Rating Outlook................................................. Stable
Date
Changed
1131/06
1131/06
1/31/06
1/31/06
Analysts
Philip W. Smyth, CFA
+l 212908-0531
philip.smyth(g)fi tchratings. com
Karen Anderson
[phone]
karen.anderson(g) fi tchrati n gs. com
Marina Passalacqua
[phone]
marina. passalacqua(g)fi tchratings. com
Profile,
PPW, a:n ~perating utility subsidiary of its
indirect parent SF, provides integrated
electric service to 1.million retail
customers in parts of six western states:
Utah, Oregon, Wyoming, Washington,
Idaho and California.
Related Research
Credit Update: April!4, 2005.
Credit Analysis: Oct. 18, 2004.
t(ey, CreditStr~ngthSi ,
. . .~' "
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Inipioved~~a~o/etjViroririJent:
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Key Credit Coi1cerns
Orgoing negagyefree cas!! flow due to
higJ1capital~xpendi~ requlretrients;
Growingr~li!irt~onnatural gas-fJreCI
generati~.-:,i:/.
..".: ''-.
. Adverse Oregpn tixnilhIg in GRC
, niay si~al de~norati9ijin thesllite~s
regulatory climate.
. '
March 7, 2006
Rating Rationale
PacifiCorp s (PPW) ratings were reduced by Fitch on Jan. 31 , 2006.
The lower ratings and Stable Rating Outlook better reflect the
company s operating cash flow and debt leverage measures, large
capital spending program and business risk profile. The ratings and
stable outlook consid~r PPW'projected above-industry-average
service territory growth, primarily in its Eastern service territory;
significant planned investment in new plant and infrastructure to meet
its load requirements, estimated to approximate $1 billion annually
over the next five years; and growing exposure to natural gas-fired
generating capacity. The ratings and stable outlook assume reasonable
regulatory outcomes in pending and future rate proceedings, while
noting the adverse September 2005 final order issued in PPW'
Oregon general rate case (GRC) and pending rehearing. Fitch also
assumes the completion of the planned $285 million equity infusion
, .
net of dividends, from PPW's direct parent, PacifiCorp Holdings, Inc.
(PHI), during fiscal 2006 of which a net amount of about $215 million
has already been made.
PPW is a direct subsidiary of PHI, which is a wholly owned subsidiary
of Scottish Power pIc (SP, senior unsecured debt rated 'BBB+'). SP
intends to divest PPW and has entered into an agreement to sell the
utility to MidAmerican Energy Holdings (MEHC; rated 'BBB'). The
agreed-upon transaction, announced May 2005, has received
regulatory approvals in all six states in PPW's service territory and
appears to be on track to close by the end of March 2006. Fitch views
the change in ownership as a stabilizing credit factor for PPW.
The primary credit concern is potential unsupportive regulatory
actions, especially in light of the company s large construction budget
and low earned returns. In addition, the utility s growing reliance on
gas-fired generation and exposure to high commodity costs in the
event of Ii prolonged, unscheduled base-load plant outage during a
period of high demand is a source of concern for PPW fixed-income
investors.
Recent Developments
With the recent issuance of a written order by Wyoming regulators
approving the proposed acquisition of PPW by MEHC, all state
regulators in PPW's six-state service territory have approved the
transaction. Following negotiation of terms under the most favored
state provision of the proposed acquisition, Fitch expects the merger to
close by the end of March 2006.
www.fitchratings.com
FitchRatin
KNOW YOUR RISK
Corporate Finance
Scottish Power PCL PacifiCorp Holdings Inc. Corporate Organization
(Jurisdiction of Organization)
Scottish Power pic
(Scotland)
Scottish Power ScottishPower
NA 1 Limited NA 2 Limited
(Scotland)(Scotland)
PacifiCorp Holdings, Inc.
(Delaware)
Pacific Klamath PPM Energy, Inc.PacifiCorp Group
Energy, Inc.Holdings PaclflCorp
(Oregon)(Oregon)Company (Oregon)
Source: Company reports.
In a negative development, the Oregon Public
Utilities Commission (OPUe) issued a final order
incorporating the effects of Senate Bill (S.) 408
and reducing the authorized revenue increase to
approximately $26 million ftom the $52 million
stipulated in settlement agreements reached with
intervener groups in its GRC. The OPUC has agreed
to rehear the application of S.B. 408 in the GRC and
a decision in the proceeding is expected around mid-
2006.
Liquidity and Debt Structure
At Dec. 31 2005, PPW had $164 million of cash on
its balance sheet and no borrowings under the
utility'recently renegotiated $800 million
committed revolving credit facility. The new credit
facility extended the maturity date to August 2010
ITom May 2007, while increasing the maximum debt-
to-total capital covenant to 65% ITorn 60%. Notes
payable and commercial paper (CP) issued were
$215 million and current maturities $315 million. At
Dec. 31 , 2005, total PPW debt was approximately
$4.3 billion and PPW's debt-te-capitalization ratio
was 53.1%.
Growth and Capital Expenditures
PPW's retail sales growth is expected to approximate
2.20/0-5% annually over the coming five years.
PPW's east em region (composed of Utah, Wyoming
and Idaho) is expected to grow at a faster rate, driven
by continued economic expansion in the Wasatch
Front region of Utah and oil and gas expansion in
Wyoming, while growth in the company s western
region (composed ' of Oregon. Washington and
California) is expected to be more sluggish.
PacifiCorp plans to invest approximately $1 billion
annually in utility plant during fiscal 2006-2010,
representing more than 34% of gross utility plant
which approximated $14.8 billion at the end of
PPW's fiscal third quarter (i.e., December 2005).
The financial impact of PacifiCorp s large capital
investment program will depend on its ability to
avoid cost overruns and fully recover its investment
through increased base rates and customer growth.
The anticipated capital infusion of slightly less than
$300 million net of dividends (of approximately
$200 million) in fiscal 2006 ITom PHI and reasonable
prospective rate treatment should support the
company s credit metrics, which, are in line for the
current rating category. Conversely, negative
regulatory decisions would likely result in continued
under-earnings and bring pressure to bear on the
company s credit metrics. Fitch expects PPW to
remain active on the regulatory ftont, as it has been in
recent years, to recover its considerable planned
investment in new utility plant in its six-state service
territory. PPW recently filed a GRC in Oregon
requesting a $112 million (13%) rate increase based
on an 11.5% authorized return on equity and is
expected to file a GRC in the near future in Utah.
PacifiCorp
FitchRatings
KNOW YOUR RISK
Corporate Finance
Amount Requsted Requested Expected Date
Requested Increase % ROE (%)Of Final Order Comment
PPW requested a December 2006 implementation
Feb.2oo6 Oregon 112 13.2 11.50 - 4006 date.
NoY.2005 California 11 15.6 11.80 Dec.2006 PPWrequestedaJan. 1 . 2007. Implementation date.
May 2005 Washington 33 14.9 11.13 Apr. 2006 New rates expected to be effective in April 2006.
ROE - Return on equity. PCAM - Power cost adjustment mechanism. Note: PPW has filed to implement PCAMs In Califomla, Utah, Washington
and Oregon. Sources: Fitch Ratings. Regulatory Research Associates and company reports.
Summary of Pending PPW Rate Proceedings
($ Mil.
Filing
Date Jurisdiction
Fitch believes the completion of the proposed
acquisition of PPW by MERC would be a constructive
credit development, as the p'rospective acquirer is
expected to allow PPW to retain its earnings to support
capital expenditures in the foreseeable future. All else
equal, Fitch believes greater retention of earnings and
cash at PPW would reduce the need to access external
sources of capital to fund its capital program, ultimately
resulting in credit metrics more supportive of the currentrating category.
Power Procurement Issues
PacifiCorp has long operated with a net-short generation
position, relying on short- and long-tenn wholesale
power purchases to close the gap between its in-house
capacity and peak retail load. PPW's 2005 reserve
margin was a negative 16%, based on its instantaneous
retail pe3k'demand of 9,527 megawatts and its in-house
net-generating capacity of 7 981 megawatts. In 2005,
PPW relied on short- and 10ng-tem1 purchase power
arrangements to meet approximately 21% of its energy
requirements.
Growing Exposure to Natural Gas
While a large majority of the utility s generating
capacity mix is coal-fired, incremental load growth, in
the near-to-intem1ediate term, is expected to be met
primarily by natural gas fueled and, to a lesser degree
renewable resources. In the longer term, construction of
a COal-flfed plant in concert with' other regional
generating companies is possible. PPW is fully hedged
through the end of 2007, including supply for its
planned combined cycle generating capacity; however,
it remains vulnerable to unplanned generation plant
outages of significant duration during periods of high
power prices. PPW has filed requests with regulators in
Oregon, Utah, California and Washington, and recently
received approval from Wyoming regulators, to
implement fuel and purchase power cost adjustment
mechanisms designed to reduce commodity cost risk.
Currant Creek and Lake Side Update
The construction and commercial operation of the
525-megawatt Currant Creek and 534-megawatt Lake
Side combined cycle natural gas-fired power projects
are scheduled for the summer 2005-2007 period.
Currant Creek achieved simple cycle operation in
summer 2005 and is expected to enter combined
cycle operation, by summer 2006. The Lake Side
combined cycle unit is expected to begin commercial
operation by summer 2007. Total capital
expenditures to construct the Currant Creek and LakeSide generating facilities are estimated to
approximate $700 million.
Regulatory Developments
Oregon
In September 2005, the OPUC issued a final order in
PPW's aRC authorizing a $25.9 million revenue
increase based on a 10% authorized return on equity
(ROE). The utility filed the rate case in November
2004 requesting a $102 million (12.5%) increase in
revenue based on an 11.1 % requested ROE.
B. 408 Impact on Oregon GRC
PPW entered into aRC settlement agreements with
interveners in 2005 supporting an approximately
$52 million revenue increase. However, the OPUC
included in its final order a $26.6 million revenue
requirement reduction based on the provisions ofS.
408, which was enacted in Oregon in early
September 2005. S.B. 408 requires the OPUC to
adjust rates to reflect taxes actually paid to a
government agency. The legislation requires that
actual taxes paid be compared to amounts reflected in
rates. If taxes collected by a utility are greater than
amounts actually paid by its corporate parent, due to
tax reductions from non-jurisdictional affiliates, the
amount collected above the amount paid to a
government entity would be refunded to rate payers.
On Oct. 28, 2005, PPW filed a petition with the
OPUC requesting rehearing of the revenue reduction
associated with implementation of S.B. 408 in its
September' 2005 aRC order, which was granted by
the commission in December 2005. The rehearing
will consider if the revenue reduction resulting from
PacifiCorp
..
F i tch!!~!i.~gs Corporate Finance
Summary of Major Rate General Rate
Case Orders Since January 2004
($ Mil.)
Amount Increase Auth. Effective
Jurisdiction Approved ("/0) ROE DateWyoming 25 --e:9 March/July 2006
Oregon 26 3.2 10.00 Oct. 2005Idaho 6 4.8 NA Sep. 2005Utah 51 4.4 10.50 Mar. 2005Washington 15 1.NA Nov. 2004Utah 65 1.0 10.10 Apr. 2004Wyoming 23 1.2 10.15 Mar. 2004
Reconsideration in process. ROE - Return on equity. NA - Not
applicable. Auth. - Authorized. Sources: Filch Ratings. Regulatory
Research Associates and company reports.
, application of S.B. 408 violates Oregon
constitution. The OPUC will also review whether the
recent legislation should be applied to the rate case
and, if so, how it should be implemented. In its filing,
PPW asserts that even if the statute is applicable, the
revenue reduction should be lowered to slightly less
than $3 million to correct a calculation error in the
OPUC's final order. Hearings in the proceeding are
expected to begin in mid-to-late April 2006 and a
final order is expected in June 2006.
Utah
PPW's 'lw,t GRC, approved February 2005,
I authorized a $51 nlillion revenue increase effective
March 2005. Separately, the Utah Committee for
Consumer Services (UCCS), a state consumer
advocate group, filed a request with the public
service commission to return at least $50 million of
t~xes collected from Utah rate payers that were
allegedly improperly retained by PHI. PacifiCorp
disagrees with and intends to oppose the claims made
by the UCCS. A procedural schedule to hear the
matter has not been established.
Washington
PPW supports a general rate increase of$32.6 million
in its Washington filing or a 15% rate hike. The filing
also requests implementation of a power cost
adjustment mechanism (PCAM). A final order
expected by April 2006.
California
In November 2005, PPW filed a GRC with the
California Public Utilities Commission (CPUC)
requesting an $11 million rate hike or approximately
a 16% increase, including a request to implement a
PCAM. A final order is expected in December 2006.
Outlook Rationale
The Stable Rating Outlook assumes balanced
regulatory outcomes in response to pending and
prospective rate filings. The recent Oregon
commission ruling in PPW's GRC is a significant
source of concern, in Fitch's view. Fitch views
the proposed sale of PPW to MEHC as a
potentially stabilizing credit factor.
What Could Lead to Positive Rating
Action?
Greater than anticipated. relative debt
reduction.
Constructive
outcomes.
prospective regulatory
What Could Lead to Negative Rating
Action?
Adverse regulatory developments, especially
in light of the company s large cap-ex
program.
. A major, extended generating plant outage.
Failure to complete the proposed sale of
PPW to MEHC.
Other Jurisdictions
In addition to the $51 million Utah rate increase
granted by the Utah Public Service Commission
(PSC) and the $26 million revenue hike granted by
the OPUC in 2005, regulators in Idaho approved a
settlement agreement authorizing a $5.8 million or a
8% base rate increase effective June 2005. In
Wyoming, PPW was recently granted a $25 million
rate increase by regulators, $15 million of which is to
he effective March 1, 2006, and the remaining
$10 nlillion July 1,2006. Importantly, the Wyoming
PSC also approved implementation of a PCAM. PPW
has requested PCAMs in California, Washington and
Oregon and filed with Utah regulators to implement a
PCAM following the conclusion of its anticipated
2006 Utah GRC.
Proposed Acquisition
The proposed sale of PPW by SP to MEHC appears
to be on track to close near the end of the fIrSt quarter
of 2006. The $9.4 billion transaction includes the
assumption of $4.3 billion of net debt and preferred
stock and was announced May 24, 2005. The
prospective acquisition has received clearance under
the Hart-Scott-Rodino Act and the approval of the
Federal Energy Regulatory Commission and the
PacifiCorp
.,
FitchRatings
KNOW YOUR RISK
Corporate Finance
Nuclear Regulatory Commission. All necessary state
approvals have been obtained and the agreed
acquisition appears on track to close by the end of
March 2006.
Fitch views the ownership change as a stabilizing
factor for PPW's credit profile. Conversely, an
unexpected failure ,to complete the pending
transaction would result in significant uncertainty as
to the future ownership of PPW, which in Fitch'
view would be a negative credit development.
Hydro Conditions
PPW's hydroelectric generation was 84% of normal
for the nine months ended Dec. 31 2005, compared
to a 30-year average; ,nonetheless, output rose 9% in
2005 as hydro conditions improved compared to the
nine months ended Dec. 31 , 2004. While we are only
about halfway through the key snowpack season in
the Pacific Northwest, it appears water flows may
return to normal levels, driven by significant snow
accumulation and above-average recent precipitation
trends, especially in January 2006, following several
years of drought conditions.
PacifiCorp
, ..
Fitch!!~!~~gs Corporate Finance
Financial Summary - PacifiCorp
($ Mil.)
LTM Ended
12/31/05 12/31/04 3/31/05 3/31/04 3/31/03
69.80.77.65.
69.72.60.96.122.
230.170.4 194.161.126.
290 202 049 195 082
234 056 101 038 902
964 gOO 913 896 885
173 026 1;093 047 923
446 437 437 429 434
728 589 656 618 489
291 275 267 257 270
299 228 250 245 133
43.46.43.44.46.
32.28.31.30.25.
926 724 711 832 682
230 (174)(129)(25)(74)
697 898 840 857 755
(209)(187)(195)(165)(7)
(1028)(746)(852)(690)(550)
(311)(209)(336)(24)124
(1395)(1394)
170 479 303 (297)
368 (8)(8)(360)143
Fundamental Ratios (x)
FFO/lnterest Expense
CFO/lnterest Expense
Debt/FFO
Operating EBIT/lnterest Expense
Operating EBITDAllnterest Expense
Debt/Operating EBITDA
Common Dividend Payout (%)
Internal Cash/Capital Expenditures (%~
Capital Expenditures/Depreciation (%)
Profitability
Revenues
, Net Revenues
Operating and Maintenance Expense
Operating EBITDA
Depreciation and Amortization Expense
Operating EBIT
Interest Expense
Net Income for Common
Oper. Main\. Exp. % of Net Revenues
Operating EBIT % of Net Revenues
Cash Flow
Cash Flow from Operations
Change in Working Capital
Funds from Operations
Dividends
Capital Expenditures
Free Cash Flow
Net Other Investment Cash Flow
Net Change In Debt
Net Change in Equity
Capital Structure
Short-Term Debt 529 481 742 369
Long-Term Debt 3 771 3,762 3,678 3,577Total Debt 4 300 4,243 4,420 ' 3,945
Preferred and Minority Equity 41 41 41 Common Equity 3,764 3,297 3,336 3;279Total Capital 8,105 7,582 7,797 7,265
Total DebtITotal Capital (%) 53.1 56.0 56.7 54.
Preferred and Minority Eq.rrotal Capital (%) 0.5 0.5 0.5 0.
Common Equityrrotal Capital (%) 46.4 43.5 42.8 45.
Note: Numbers may not add due to rounding. Numbers are adjusted for interest and principal payments on transition property securitization
certifICates. Long term debt includes trust preferred securities.L TM - Latest 12 months. Operating EBIT - Operating income plus total reported state
and federal income tax expense. Operating EBITDA - Operating income plus total reported state and federal income tax expense plus depreciation
and amortIZation expense. FFO - Funds from operations. CFO - Cash flow from operations. O&M - Operations and maintenance. Source: Financial
data obtained from SNL Energy Information System, provided under license by SNL Financial, LC of Charlottesville, Va.
162
759
921
108
195
224
54.
44.
Copyright C 2006 by Fitch, Inc., Fitcb Ratings Ltd. and its subsidiaries. One State Stre" Plaza, NY, NY 10004.
Telephone: [phone]. Fax: (212) 48G-4435. Reproduction or retransmission in whole or in pan is prohibited excep! by permission. All rip.. reserved. All of Ibc
information contained berein is bosed on informatinn obtained from issuers, other obligors, underwritm;. and other soorces which Fitch believes In be reliable, Fitch does not audit nr verify Ibc
truth or accuracy of any sucb information. As a resuI~ the information in this report is provided "as is" without any representatinn or wananty of any kind. A Fitob ",ting is an opinion as to Ibc
crcdilWoJ1hiness nf a security. The ",ting docs nnt address the risk of 1065 clue to risks Olher lhan credit risk, unless sueb risk is specifically mentioned. Fitch is not engaged in the offer or sale of
any security. A report providing a Fitcb raring is neither a prospectus nor a substitute for the infonna,inn assembled, verified and presented to iDvestora by Ibc issuer and its agenla in connection
with tbe sale nfthe securities. Ratings may be cbanged, suspended, or withdrawn at anytime for any reason in the sole discretion of Filcb. Fitcb does not provide investment advice of any sort,
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PacifiCorp
(D6-Mar-2006) Research Update: MidAmerican Upgraded To ', PacifiCorp Ratings Moo.Page 1 of4
I STAN
DARD
&POOIrS IRATlNGSDIRECT
RESEARCH
Research Update: MidAmerican Upgraded To '
PacifiCorp Ratings Affirmed; All Ratings Off Watch
06-Mar-2006
Scott Taylor, New York (1) 212-438-2057;
scotUa ylor~sta nda rdandpoors. com
Anne Selting, San Francisco (1) 415-371-5009;
anne - selti ng~sta nda rda ndpoors. com
Publication date:
Primary Credit Analyst:
Secondary Credit Analyst:
Credit Rating:/Stable/-
Rationale
On March 6, 2006, Standard & Poor ' s Ratings Services raised its corporate
credit rating on diversified energy company MidAmerican Energy RoldingsCo. (MERC) to '' from ' BBB- '. At the same time, Standard & Poor s raised
its rating on MERC's senior unsecured notes to 'BBB+' from 'BBB-' and its
rating on MEHC's CalEnergy Trust preferred stock to 'BBB-' from 'BB'
Standard & Poor s removed all the ratings from CreditWatch with positive
implications.
Furthermore, Standard & Poor s affirmed its ' A-' corporate credit
rating on PacifiCorp and removed the rating from CreditWatch with negative
implications. All the ratings on PacifiCorp ' s debt were also affirmed and
removed from CreditWatch with negative implications.
The outlook is stable.
Des Moines, Iowa-based MERC is acquiring PacifiCorp from Scottish
Power Plc. The upgrade of MEHC and ratings affirmation for PacifiCorp
reflect the impending close of the acquisition. MEHC has received the
necessary approvals from all six state regulators to acquire PacifiCorp,
and the company expects the transaction to be completed later this month.
The ratings on MERC and PacifiCorp were originally placed on
CreditWatch on May 25, 2005, when the acquisition was announced.
MEHC is expected to purchase the equity in PacifiCorp from
scottishPower plc for approximately $5.1 billion in cash. PacifiCorp ' s
debt and preferred securities of, $4.3 billion will remain outstanding.
PacifiCorp is expected to account for about 35% of MERC' s operating income.
Following the acquisition of PacifiCorp, MEHC will have about $16.
billion of consolidated debt and $1.6 billion of trust-preferred
securities outstanding at the holding company level.
The ratings on MEHC and PacifiCorp reflect the consolidated company ' s
creditworthiness and incorporate its strong business risk position, fairly
aggressive financial profile, and both explicit and implicit support from
MERC's parent, Berkshire Rathaway Inc. (AAA/Stable/A-1+). Absent this
support, MEHC' s business and financial risk would support a rating in the
BBB' category. The ratings on MERC's parent-level debt consider the
ring-fenced structure of MERC' s subsidiaries and MERC 's ability to meet
its parent-level financial obligations from dividend distributions from
its portfolio of energy assets.
The upgrade reflects Standard & Poor s acknowledgement of Berkshire
Hathaway s greater support of MEHC, provided by a $3.5 billion equity
commitment agreement, which in our view would be called upon, if
necessary, to support the rating on MERC. The upgrade also reflects
Berkshire Hathaway s increase in voting interest to 88% from 9.9%, due to
a combination of its conversion of non-voting interest to voting interest
upon the repeal of the Public Utility Holding Company Act last month and
http://www.ratingsdirect.com/Apps/RD/controller/ Artic1e?id=496221 &type=&outputType=...3/6/2006
L06-Mar-2006) Research Update: MidArnerican Upgraded To ', PacifiCorp Ratings M...
its equity 'contribution to MEHC for the PacifiCorp acquisition. Comfort is
also provided by public statements by Berkshire Hathaway regarding itsstrategic focus on the regulated side of the .utility business.
Furthermore, the higher rating on MEHC reflects its steadily
improving credit metrics. In recent years, MEHC' s , consolidated credit
metrics have improved due to the acquisitions of two large pipeline
assets. Funds from operations (FFO) to interest has improved to 3.1x for
2004 from 2. 3x for 2002, while over the same time period FFO to debt
improved to about 12.9% from about 9.3%. Credit metrics should continue to
improve following the acquisition of PacifiCorp, as MEBC deleverages that
entity through the reinvestment of operating cash flow.
Finally, the upgrade reflects MEHC's declining business risk as it
has incorporated more stable regulated businesses and diversifiedregionally within the u.s. We have revised MERC's business risk profile
score to '4' (strong) from ' 5' (satisfactory). Business profiles are
categorized from '1' (excellent) to '10' (vulnerable). The revision
follows a thorough review of the company s business risk, taking into
account the substantially smaller concentration in unregulated ventures
(less than 10% of operating income going forward) and the substantial
regional diversification following the PacifiCorp acquisition. The
increased regional diversification will benefit the company on a
consolidated basis due to the greater diversification of regulatory,
operating, and economic risk factors. The lower business risk profile
score also reflects our expectation that MERC' s future acquisitions will
be in the regulated utility segment and not in unregulated or
commodity-exposed businesses, a concern that we had previously factored
into MEHC' s business profile score.
As part of agreements reached by MEBC, PacifiCorp, and the regulators
in each of the states served by PacifiCorp, MEHC is expected to ring fence
PacifiCorp from MEBC. The ring-fencing serves to insulate PacifiCorp in
the event that MEHC' s consolidated creditworthiness deteriorates due to
other businesses in the MEBC family. PacifiCorp will not pay dividends to
MEHC from its cash flow unless it maintains a 48.25% common equity layer
through 2008, gradually falling to 44% in 2012.
MEBC's acquisition of PacifiCorp reflects a strategic decision to
continue to acquire regulated utilities that can benefit from MEBC'
established record of enhancing operational and financial performance
through a mixture of improved regulatory relationships, cost reductions,
and the funding of investment with the use of equity sufficient to
maintain roughly a 50-50 capital structure. Acquired by Scottish Power in
1999, PacifiCorp has struggled to generate cash flows commensurate with
performance seen before the western energy crisis in 2001, when the
utility s purchased power requirements led to large deferrals. FFO levelshave only stabilized in the last two f,iscal years (ending March 31), and
the utility s financial performance has fallen short of Scottish Power ' s
forecasts. Adjusted FFO to total debt over the past three years has ranged
from 17%-18%, factoring in PacifiCorp s off-balance-sheet obligations,
which reflect sizable power purchases. Adjusted FFO interest coverage has
been around 3. 5x over the same period. similar metrics are expected for
PacifiCorp s fiscal 2006.
PacifiCorp s future challenges include a $6.4 billion capital program
over the next five years, its ongoing inability to earn its authorized
rate of return, and pending and expected rate cases in the company s two
largest markets, Utah and Oregon, where the company is seeking significant
retail rate increases. In addition, the acquisition of PacifiCorp will
result in MEHC, through PacifiCorp and MidAmerican Energy Co.
(A-/Stable/A-1), having nine state regulators, which will present
logistical and performance challenges that are unique.
The rating reflects the expectation that PacifiCorp I s credit metrics
will improve, MEHC will fund its substantial near-term capital needs
primarily with equity, and the company will achieve stronger returns on
the newly invested capital. The rating also reflects the expectation of
reasonable regulatory outcomes in the general rate cases, although the
application of SB408 in Oregon is an ongoing concern.
Standard & Poor s continues to expect stable performances from MEBC'
regulated u.s. assets. The pipelines, Kern River Gas Transmission Co.
http://www.ratingsdirect.com/ AppslRD/controller/ Artic1e?id=496221&type=&outputType=...
Page2of4
3/6/2006
. ~O6-Mar-2006) Research Update: MidAmerican Upgraded To ', PacifiCoIp Ratings M...Page 3 of 4
(A-/Watch Neg/--) and Northern Natural Gas Co. (A-/Watch Pos/--) , and
electric utility MidAmerican Energy continue to support holding-company
debt and offset lower returns from the company s U. K. investments in
Electric U.K. Funding Co. (BBB-/Stable/A-3). Unregulated ventures continue
to perform well for the most part, but will be fairly insignificant
following the PacifiCorp acquisition.
Short-term credit factors
MEHC I S relationship to Berkshire Hathaway and its $3.5 billion equity
commitment agreement provide it with substantial liquidity. In
addition, each subsidiary maintains liquidity for its own needs. At
the parent level, MEHC has adequate liquidity and access to capital
to meet ongoing financial obligations. MERC maintains $400 million
revolving, unsecured credit facilities to support liquidity needs and
LOCs. As of Sept. 30, 2005, its borrowings totaled $55 million, and
an additional $49.5 million of capacity was taken with LOCs. The
revolver matures in August 2010. Total unrestricted cash at the
pare~t and subsidiaries was $594.8 million as of Sept. 30, 2005,
which is sufficient, given MERC' s stable distribution profile and
limi ted equity commitments.
In acquiring PacifiCorp, MEHC will purchase all of PacifiCorp '
outstanding common shares for about $5.1 billion in cash. MEHC
expects to fund the acquisition from an investment by Berkshire
Hathaway of about $3.4 billion in common stock and the issuance by
MEHC to third parties of about $1.7 billion of long-term senior
notes.
PacifiCorp is expected to continue to provide for its own
liquidity needs. Its cash and cash equivalent position was $164
million as of Dec. 31, 2005, -relative to $199 million as of year-end
fiscal 2005. The utility maintains an $800 million commercial paper
program, which had $215 million outstanding as of Dec. 31, 2005. The
program is backstopped by a revolving credit agreement that
terminates in August 2010. PacifiCorp has a sizable capital
expenditure program and expects to spend about $1 billion annually in
the coming years. PacifiCorp ' s maturities over the next five years
are manageable, typically in the range of $,200 million, with $216
million due in 2007. A sizable maturity of $412 million is due
2009. .
MEHC will need to maintain its access to capital markets, as it
has some large maturities to fund in the coming years. Maturities atthe parent over the next five years include trust-preferred
redemptions of $234 million each year through 2009. MEHC repaid a
$260 million maturity in September 2005, and has no maturities
2006, $550 million in 2007, $1 billion in 2008, and none in 2009.
MEHC has no ratings triggers embedded in its financing documents.
Outlook
The stable outlook on PacifiCorp reflects MEHC I S consolidated
creditworthiness. Both entities benefit from Berkshire Hathaway ownership.
Standard & Poor I s expects MEHC to improve PacifiCorp I s financial
performance and capital structure over time. In addition, we expect MEHC
to continue to focus on its regulated business strategy. To date,
Berkshire Hathaway s investments have given MEHC financial flexibility,
with excellent access to capital to pursue opportune acquisitions, which
are strengthening MEHC I S credit profile.
With the repeal of the Public Utility Holding Company Act, Standard &
Poor s expects further acquisitions of regulated utili ties in a manner
that will continue to support the ' A-' rating. If MERC' s financial
performance is weaker than forecast, or our view of parent support from
Berkshire-Hathaway changes, a downgrade could result. The rating has
limi ted upside, as improving financial metrics and a successful
integration of PacifiCorp have been assumed.
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, (06-Mar-2006) Research Update: MidAmerican Upgraded To ', PacifiCorp Ratings M...Page 4 of 4
Ratings List
Ratings Raised, Off Watch Pos
MidAmerican Energy Holdings Co.Corporate credit rating A-/Stable/--
Senior unsecured debt BBB+Preferred stock BBB-
BBB-/Watch Pos/--
BBB-/Watch Pos
BB/Watch Pos
Ratings Affirmed, Off Watch Neg
From
PacifiCorp
Long-term corp credit rtg
senior secured debt
Senior unsecured debt
Preferred stock
A- /Stable
BBB+
BBB
/Watch Neg
/Watch Neg
BBB+/Watch Neg
BBB/Watch Neg
Ratings Affirmed
PacifiCorp
Short-term corp credit rtg
Commercial paper A-2
Complete ratings information is available to subscribers of RatingsDirect,
Standard &' pcor ' s Web-based credit analysis system, at
www. ra tingsdirect. com. All ratings referenced herein can be found on
standard & Poor s public Web site at www.standardandpoors.com; under
Credit Ratings in the left navigation bar, select Find a Rating, then
Credit Ratings Search.
Analytic services provided by Standard & Poor's Ratings Services (Ratings Services) are the result of separate activities
designed to preserve the independence and objectivity of ratings opinions. The credit ratings and observations contained herein
are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make
any other investment decisions. Accordingly, any user of the information contained herein should not rely on any credit rating or
other opinion contained herein in making any investment decision. Ratings are based on information received by Ratings
Services. Other divisions of Standard & Poor's may have information that is not available to Ratings Services. Standard & Poor's
has established policies and procedures to maintain the confidentiality of non-public information received during the ratings
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Ratings Services receives compensation for its ratings. Such compensation is normally paid either by the issuers of such
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Copyright ~ 1994-2006 Standard & Poor s, a division of The McGraw-Hili Companies.
All Rights Reserved. Privacy Notice
fhe McGra w 'Hill Companii'.!i
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%-r,;;
http://www.ratingsdirectcom/ Apps/RD/controller/ Article?id=496221&type=&outputType=...3/6/2006
PacifiCorp Page 1 of3
IIoodY's .........S8rwIc8
Global Credit Research
Credit Opinion
1 MAR 2006
Credit Opinion: PacifiCorp
PacifiCorp
Portland, Oregon. United States
Ratings
Category
Ou1look
Issuer Rating
Rrst Mortgage Bonds
Senior Secured
Senior Unsecured MTN
Suborclnate Shelf
Preferred Stock
Commercial Paper
Parent: Scottish Power pic
Outlook
Issuer Rating
Sr Unsec Bank Credit Facility
Senior Unsecured
Utah Power & light Co
Oudook
Preferred Stock
Moody s Rating
Stable
Baa1
Baa1
(P)Baa2
Baa3
Stable
Baa1
Baa1
Baa1
Stable
Baa3
Contacts
Analyst
A.J. SabatellelNew York
Kevin G. Rose/NewYork
Daniel Gates/New York
Phone
212.553.1653
Key Indicators
PacifiCorp
l TM Q3 2006 2005 2004 2003
Funds from Operations Adjusted Debt (1)18.18.2"10 20.7"10 17.7"10
Retained Cash Flow Adjusted Debt (1)14.2"10 14.16.17.
Common Dividends Net Income Available for Common 69%77%66%
Adjusted Funds from Operations + Adjusted Interest 4.12
Adjusted Interest (2)
Adjusted Debt Adjusted Capitalization (1)(3)54.0%57.55.56.
Net I ncome Available for Common Common Equity 4.2%
(1) Debt is adjusted for operating leases, guaranteed preferred beneficial interests in company s junior sub, and
debentures & preferred stock subject to mandatory redemption. (2) Adjusted Interest reflects adjustments for
operating leases and preferred stock clvidends. (3) Adjusted Capitalization reflects the adjusted debt
Note: For definitions of Moody's most common ratio terms please see the accompanying Users Guide
http://www.moodys.comlmoodys/ custlresearch/mdcdocs/27 /2002900000428342.asp? source.. . 3/1/2006
PaclttCorp 1"'age'.l. or
Opinion
Rating Rationale
The Baa1 senior unsecured rating of PacifiCorp reflects expected credit memes that are consistent with a Baa1
rating for a vertically integrated utility with PacifiCorps risk profile under Moody's industry rating methodology
(please refer to Rating Methodology: Global Regulated Electric Utilities, March 2005) and in comparison to similar
companies. Key financial metries include the ratio of adjusted funds from operations (FFO) to total adjusted debt
that has averaged about 19% for the past three years, and the ratio of FFO to interest expense that has averaged
about 4.Ox during the same period.
The rating incorporates the belief that, following the acquisition of PacifiCorp by MidAmerican Energy Holding
Company s (MEHC) from Scottish Power pic, MEHC WIll manage PacifiCorp s business, including its future capital
structure, in a way that is supportive to credit quality, including the contribution of ongoing equity to support the
utility's capital expenditure program. The rating also considers MEHC's longer-term investment horizon, and
recognizes its experience in operating several regulated utility systems in different geographic regions.
Of additional importance to PacifiCorps ratings are the legal and regulatory factors that are expected to
significantly insulate the credit quality of PacifiCorp from the credit quality of MEHC as its new parent. In this
regard, key provisions include the appointment of an independent director, the regulatory requirement that a
minimum common equity level that ranges between 44.ooM and 48.25% be maintained to allow distributions, and a
prohibition on the payment of cividends if PacifiCorp s senior unsecured debt ratings fall below investment grade.
The rating incorporates the expectation that PacifiCorp will continue to receive reasonable regulatory treatment
throughout its six-state jurisdiction for the recovery of supply and delivery-related capital investment and operating
costs. PacifiCorp s relatively stable financial performance has been aided by generally supportive regulatory
decisions for capital investment and for recovery of power procurement costs. However, PacifiCorp has numerous
remaining regulatory challenges in several of its key juriscictions, the outcome of which could impact future credit
quality at the utility. Of particular near-term importance is the outcome of several outstanding regulatory and
legislative issues in Oregon. Operating revenues from Oregon jurisdictional customers represent about 300M of
PacifiCorps operating revenues. These issues include the rehearing of PacifiCorps September 2005 Oregon
general rate case (GRC), which substantially reduced the recommended rate increase by incorporating terms of
the recently enacted tax-related legislation (Senate Bill 408) into the decision, the outcome of permanent
rulemaking concerning the implementation of Senate Bill 408, and a final decision ofthe company s recently filed
GRC.
The rating recognizes that the major regulatory impediments to the acquisition of PacifiCorp by MEHC appear to
have been satisfied and that the acquisition is now expected to take place in the next 30 days. The transaction has
been formally approved by the regulators of all six states that regulate PacifiCorps utility operations. The
transaction has also been approved by the Federal Energy Regulatory Commission, the Nuclear Regulatory
Commission and the Department of Justice. Each of the state regulatory authorities has an opportunity for final
review, particularly for "most favored states" consideration of approval conditions that Were imposed by other
jurisdictions.
Rating Outlook
The rating outlook is stable reflecting an expectation of fairly supportive regulatory decisionS and a conservatively
financed capital investment program
The rating outlook also recognizes that the acquisition, when completed, will eliminate an overhang of uncertainty
that resulted from Scottish Power's clear intention to divest PacifiCorp.
What Could Change the Rating - UP
While the size of the company's capital expenditures limits the prospects for a rating upgrade at PacifiCorp in the
near-term, the rating could be upgraded if reasonably regulatory support and a conservatively financed capital
expenditure program results in a sustained improvement in crecit metries. This would include PacifiCorps FFO to
total adjusted debt being in excess of 20% and its FFO to adjusted interest expense being in excess of 4.Ox both
on a sustainable basis.
What Could Change the Rating - DOWN
http://www.rnoodys.cornlrnoodysl custlresearch/rndcdocs/27 /2002900000428342.asp?source... 3/1/2006
PacitiCorp Page 3 ot3
The rating could be downgraded if reasonable regulatory support does not continue or in the unlikely event that the
acquisition by MEHC is not consummated resulting in substantial uncertainty about the future ownership of
PacifiCorp, given SP's stated desire to sell the utility.
C9 Copyright 2006, Moody s Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.
(together
, "
MOODY'). All rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANst"1mED, TRANSFERRED, DISSEt"1INATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRmEN CONSENT. All
information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty
of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness
completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall
MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or
relating to, anY error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or
any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis
interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential
compensatory or incidental damages whalsoever (including without limitation, lost profits), even if MOODY'S is advised in
advance of the possibility of such damages, resulting from the use of or inability to'use, any such information. The credit ratings
and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be
construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any
securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY
MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any
investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly
make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for
each security that it may consider purchasing, holding or selling.
MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and
commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for
appraisal and rating services rendered by it fees ranging from $1 500 to $2,400 000. Moody s Corporation (MCO) and its wholly-
owned credit rating agency subsidiary, Moody s Investors Service (MIS), also maintain policies and procedures to address the
independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors
of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an
. ownership interest in MCO of more than 5%, is posted ,3nnually on Moody s website at www.moodys.com under the heading
Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy.
Moody s Investors Service Pty Limited does not hold an Australian financial services licence under the Corporations Act. This
credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You
should, before acting on the opinion, consider the appropriateness of the opinion having regard to your own objectives, financial
situation and needs.
http://www.moodys.comlmoodys/custlresearchlmdcdocs/27/20029000004 283 42.asp?source.. .3/1/2006
.......
law..""
......
Global Credit Research
Rating Action
28 FEB 2006
Rating Action: PacifiCorp
MOODY'S AFFIRMS THE RA11NGS OF PACIFICORP (Baa1 SR. UNSECURED); REVISES RA11NG OUTLOOK
I9- ~T~I"E F~OM DEVELOP.lli
~__---------- ,_
H'H_H.,--__-
- ,---------'----'--" ------_.-.' - ,-
Approximately $4.5 BUnon of Debt Securities Affected
New York, February 28,2006 - Moody's Investors Service affirmed the debt ratings of PaciliCorp (Baa1
senior unsecured debt) and the rating ouUook to stable from developing. The action follows
regulatory approvals in all of !he six states needed to allow MidAmerican Energy Holdings Company's
(MEHC) acquisition of PacifiCorp from Scottish Power pic for $9.4 billion.
The rating affirmation reflects expected aedit mebies that are consistent with a Baa1 rating for a vertically
integrated utility with PacifiCorp's risk profile under Moody's industry rating methodolOgy and in comparison
to similar companies. Key financial metries include !he ratio of adjusted funds from operations (FFO) to total
adjusted debt that has averaged about 19% for !he past three
y~,
and the ratio of FFO to interest expense
that has averaged about 4.Ox during the same period. The rating affirmation incorporates !he belief that
MEHC will manage PacifiCorp's business, indueling its future capital structure, in a way that is supportive to
credit quality, including the contribution of ongoing equity to support the utility's capital expenditure program.
The rating action also recognizes that the acquisition will eliminate an overhang of uncertainty that resulted
from Scottish Power's clear intention to divest PaciliCorp. The rating and outlook consider MEHC's longer--
term investment horizon, and recognize its experienca in operating several regulated utility systems in
different geographic regions.
PaciliCorp's ratings consider legal and regulatory factors that are expected to significanUy insulate the credit
quality of PaciliCorp,frQffi the credit quaHty of MEHC as its new parent In this regard, key provisions indude
the appointment oJ an independent cirector, the regulatory requirement to maintain a nmimum common
equity level that ranges between 44.0% and 48.25% to allow distributions, and a prohibition on the payment
of dividends if PacifiCorps senior unseaJJ8d debt ratings fall below investment grade.
The rating affirmation incorporates the expectation that PaciliCorp will continue to receive reasonable
regulatory treatment throughout its six-state Jurisdiction for the recovery of supply and delivery-related capital
investment and operating costs. PaciliCorp's I9latively stable financial performance has been aided by
generally supportive regulatory decisionS for capital investment and for recovfKY of power procurement costs.
However, PaciliCorp has numerous remaining regulatory challenges in several of its key jurisdictions, the
outcome of which could impact future credit quality at the utility. Of particular near-term importance is the
outcome of several outstanding regulatory and legislative issues in Oregon. Operating revenues from Oregon
jurisdictional customers represent about 30% of PacifiCorp's operating revenues. These issues include the
rehearing of PacifiCorp's September 2005 Oregon general rate case (GRC), which substantially reduced the
recommended rate increase by incorporating terms.of the recenUy enacted tax-related legislation (Senate Bill
408) into the decision, the outcome of permanent rulemaking concerning the implementation of Senate Bill
408, and a final decision of the company's recenUy filed GRC.
The rating outlook is stable, reflecting an expectation of fairly supportive regulatory decisions and
conservative financing of PacifiCorp's fairly large capital investment program. While the sim of the
company's capital expenditures limits the prospects for a rating upgrade in the near-term, the rating could be
upgraded if reasonable regulatory support and a conservatively financed capital expenditure program I9sults
in a sustained improvement in credit metrics. This would include achieving ratios of FFO to total adjusted
debt in excess of 20% and FFO to adjusted interest expense in excess of 4.Ox, on a sustainable basis. The
rating could be downgraded if reasonable regulatory support does not continue, or in the unlikely event that
the acquisition by MEHC is not consunvnated and !here is substantial uncertainty about !he futul9 ownership
of PaciliCorp for a substantial period of time.
Ratings affirmed indude:
Senior secured debt; A3
Issuer Rating and senior unsecured debt; Baa1,
Preferred stock; Baa3, and
Short term rating for commercial paper, Prime-2.
Headquartered in Portland, Oregon, PacifiCorp is vertically integrated utility with operations in Oregon Utah
Washington, Idaho, Wyoming, and California. PacifiCorp is currently an indirect wholly-owned subsidi~ry of '
Scottish Power pic.
New York
Daniel Gates
Managing Director
Corporate Finance Group
Moody s Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New Yori(
A.J. Sabatelle
VP - Senior Credit Officer
Corporate Finance Group
Moody s Investors Service
JOURNALISTS; 212-553-0376
SUBSCRIBERS: 212-553-1653
COpyrigh~' 2006, MoOdy's"iiivesio~'seNfce;'fiic:andJor",iSlicensoi-S inCluding MOOdyos-Assurance COmpany~ 'lflC:
(together, "MOODY'S"). All rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMmED, TRANSFERRED, DISSEMINATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY
FORM OR ~1ANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All
information contained herein Is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors, however, such information Is provided "as Is" without warranty
of any kind and MOODY', in particular, makes no representation or warranty, express or Implied, as to the accuracy, timeliness,
completeness, merchantability or fitness for any particular purpose of any such Information. Under no circumstances shall
~100DY'S have any liability to any person or entity for (a) any loss or damage in whole or In part caused by, resulting from, or
relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or
any of its directors. officers, employees or agents in connection with the procurement, collection, compilation, analysis
interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential
compensatory or incidental damages whatsoever (including without limitation, lost profits). even if MOODY'S is advised in
advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings
and financial reporting analysis observations, if any, constituting part of the Information contained herein are, and must be
construed soiely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any
securities, NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY
MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any
investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly
make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for
each security that it may consider purchasing, holding or selling.
MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and
commercial, paper) and preferred stock rated by ~100DY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for
appraisal and rating services rendered by It fees ranging from $1,500 to $2 400 000, Moody s Corporation (MCO) and its wholly-
owned credit rating agency subsidiary, Moody s Investors Service (~t!S), also maintain policies and procedures to address the
independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors
of t~CO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to tha SEC an
ownership interest in I~CO of more than 5%, is posted annually on ~100dy s website at www.moodys.com under the heading
Shareholder Relations. Corporate Governance - Director and Shareholder Affiliation Policy.
Moody s Investors Service Pty Limited does not hold an Australian financial services licence under the Corporations Act. This
credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You
should, before acting on the opinion, consider the appropriateness of the opinion having regard to your own objectives, financial
situation and needs.
MOODY'S UPGRADES MIDAMERICAN ENERGY HOLDINGS COMPANY TO Baa... Page 1 of3
Global Credit Research
Rating Action
28 FEB 2006
....... .................
Rating Action: PacifiCorp
MOODY'S UPGRADES MIDAMERICAN ENERGY HOLDINGS COMPANY TO Basi (SR UNSEC.) FROM Baa3
AND UPGRADES TWO SUBSIDIARIES; RATING OUTLOOK IS STABLE
Approximately $5 Billion of Debt Securities Affected
New York, February 28,2006 - Moody's Investors Service upgraded MidA!nerican Energy Holdings
Company s (MEHC) senior unsecured debt rating to Baai from Baa3. Moody's also upgraded the ratings of
subsidiaries MidAmerican Energy Company (MEC; senior unsecured to K2 from A3)' and MidArrierican
Funding (MF; senior unsecured to A3 from Baai). This concludes the review for possible upgrade that was
initiated on January 23, 2006. The rating outlook is stable for MEHC, MEC and MF. There are no changes in
ratings or outlook for the other rated subsidiaries of MEHC, which were not under review.
The conclusion of the review recognizes that the major regulatory impediments to the acquisition of
PacifiCorp. which has a senior unsecured debt rating of Baa1, appear to have been satisfied and that the
acquisition is now expected to take place in the next 30 days. The transaction has been formally approved by
the regulators of all six states that regulate PacifiCorps utility operations. The trQnSaction has also been
approved by the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and the
Department of Justice. Each of the state regulatory authorities has an opportunity for final review, particularly
for "most favored states" consideration of approval conditions that were imposed by other jurisdictions.
The upgrade reflects strategic and financial benefits from the merger. The upgrade also incorporates a
perceived stronger linkage between MEHC and its majority shareholder Berkshire Hathaway Inc.
, which has
a senior unsecured debt rating of (P)Aaa, as the form of its ownership of MEHC has changed following the
repeal of the Public Utility Holding Company Act of 1935. These developments are expected to improve the
credit profile of MEHC for the following reasons:
1) The acquisition of PacifiCorp in a predominanUy equity financed transaction will result in stronger
consolidated financial ratios for MEHC;
2) The addition of PacifiCorp as a substantial subsidiary will reduce overall business risk by increasing the
proportion of cash flow that is derived from regulated utility operations;
3) PacifiCorps operations in the Northwest complement MEC's business in the Midcontinent region, and will
diversify regulatory risk and weather volatility for the core utility operations of MEHC. The transaction will
result in a more diversified customer base, service territory and generation portfolio for the consolidated
organization;
4) Following the elimination of PUHCA in February 2006, and the issuance of equity as part of the PacifiCorp
acquisition, Berkshire Hathaway will increase its voting ownership from under 1()o~ to approximately aao~,
causing MEHC to become a consolidated subsidiary for financial and income tax reporting purposes.
The upgrade of MEC's ratings reflects the expected credit improvement of MEHC and the potential for
decreased reliance upon MEC as a source of upstream dividends to MEHC when PacifiCorp becomes an
adcfrtional subsidiary. The action also represents a narrowing of the notching between the holding company
and its utility subsidiary. MEC's senior unsecured rating had previously been Constrained by the rating of
MEHC and the importance of MEC as a potential source of upstream dividends to MEHC.
The upgrade of MF is due to the upgrade of MEC. As an intermediate hotdng company, MF relies upon
dividends that are upstreamed from MEC.
MEHC will acquire PacifiCorp from Scottish Power pic (SP), rated Baa1 senior unsecured, for a value of $9.4
billion, including $5.1 billion in cash and $4.3 billion of net debt which will remain outstancing. In connection
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MOODY'S UPGRADES MIDAMERICAN ENERGY HOLDINGS COMPANY TO Baa... Page 2 of 3
with the transaction, Berkshire Hathaway will infuse about $3.4 billion of equity into MEHC. Moody'
ass~ment of the parenfs willingness to provide support also considers an equity commitment agreement
that WIll be executed between MEHC and Berkshire Hathaway. Under this agreement, MEHC will be able to
call upon equity funding of up to $3.5 billion for a five year period as needed to fund the requirements of its
regulated utility operati~n~ or to pa~ ~aturing debt obligations. This agreement is viewed as providing a clear
mechanism for the provISIon of additional support from the parent. However, the willingness to provide on-
going support is viewed as being more strongly based upon a highly rated parenfs economic incentive to
protect its investment in a consolidated subsidary.
On a stand-alone basis, MEHC's financial ratios and business risk profile would be consistent with a Baa2
rating in accordance with Moody's industry rating methodology and in comparison to the ratings of similar
companies. The expected financial profile includes a projected ratio of funds from operations to total debt of
about 15% and retained cash flow to total debt of about 14% over the next several years. The Baa1 rating for
MEHC incorporates an additional one notch lift above the stand-alone result, based upon the expectation of
parental support This considers that there are no legal undertakings to provide support other than the equity
commitment agreement
The stable outlook reflects the relatively low risk of the company's predominanUy regulated ~Iectrlc and gas
businE!SSes, and the expectation that future financial performance will have low volatility due to the
dversification of its underlying operations.
MidAmerican Energy Holdings Company is based in Des Moines lowa, and is a privately-owned global
provider of energy services. The company provides electric and natural gas services to 5 million customers.
New York
Daniel Gates
Managing Director
Corporate Finance Group
Moody s Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Richard E. Donner
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBsd~IBERS: 212-553-1653
(g Copyright 2006, Moody's Investors Service, Inc. anclfor its licensors including Moody's Assurance Company, Inc.
(together
, "
MOODY'). All rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMmED, TRANSFERRED, DISSEMINATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRmEN CONSENT. All
information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty
of any kind and MOODY', in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness
completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall
MOODY'S have any liability to any person or entity for (a) any loss or damage In whole or in part caused by, resulting from, or
relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or
any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis,
interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential
compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in
advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings
and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be
construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any
securities. NO WARRANTY. EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE
MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any
investment decision made by or on behalf of any user of the Information contained herein, and each such user must accordingly
make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for
each security that it may consider purchasing, holding or selling,
MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and
commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for
appraisal and rating services rendered by it fees ranging from $1 500 to $2,400 000. Moody s Corporation (MCO) and its wholly-
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MOODY'S UPGRADES MIDAMERICAN ENERGY HOLDINGS COMPANY TO Baa...Page 3 of 3
owned credit rating agency subsidiary, Moody s Investors Service (MIS), also maintain policies and procedures to address the
independence of MIS's ratings and rating processes. Information regarding,certain affiliations that may exist between directors
of MCa and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an
ownership interest in MCa of more than 5%, is posted annually on Moody s website at www.moodys.com under the heading
Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy,
Moody s Investors Service Pty Limited does not hold an Austra,lian financial services licence under the Corporations Act. This
credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You
should, before acting on the opinion, consider the appropriateness of the opinion having regard to your own objectives, financial
situation and needs,
http://www.moodys.com/moodyslcustiresearch/mdcdocs/28/2005 3 0000042555 2.asp?sourc.
..
2/28/2006
Fit chRa tings
FITCH LOWERS PPW SR UNSECURED DEBT TO 'BBB+'; OUTLOOK
STABLE
Fitch Ratings-New York-31 January 2006: Fitch Ratings has lowered PacifiCorp s (pPW) credit ratings as
indicated below:
Issuer default rating to 'BBB' from 'BBB+'
Senior secured to '' from '
Senior unsecured to 'BBB+' from '
Preferred stock to 'BBB' from 'BBB+'
At the same time, Fitch has affirmed PPW's 'F2' short term rating. The Rating Outlook is Stable for all
PPW's long- and short-term debt and preferred securities. The rating action affects approximately $4.4 billion
of debt.
The lowered ratings better reflect the company's operating cash flow and debt leverage measures , large capital
spending program., and business risk profile. While a large majority of the utility's generating capacity mix is
coal-fired., incremental load growth is expected to be met primarily by natural gas-fired resources. As a result
the company's natural gas requirements are likely to grow over time. Management has contracts in place to
hedge its natural gas exposure through 2007, including fuel for the new Cmrant Creek. and Lake Side power
plants, and has hydro hedges in place to mitigate in part its exposure to critical water conditions through
September 2006. In addition. regulatory filings in the past year to implement fuel and purchase power cost
adjustment mechanisms, if approved, would further mitigate commodity exposure. These filings are currently
being considered by regulators in Wyoming, Washington. Utah and Oregon. Nonetheless, the mechanisms are
not in place yet and exposure to high and rising natural gas fuel and pw:chase power costs could be significant,
especially in the event of a sustained outage at a base-load generating facility during a period of peak demand.
The ratings' also consider PPW's above-industry average service territory growth, primarily in its eastern
service territory, and significant planned investment in new plant and infrastructure to meet its load
requirements, which are estimated to approximate $1 billion per annum over the next five years.
The rating action and Stable Rating Outlook incorporate reasonable regulatory outcomes in pending and future
rate proceedings and note the unfavorable final order issued in September 2005 by the Oregon commission in
PPW's general rate case (GRC, discussed further below). The proposed sale ofPPW by Scottish Power (SP;
senior unsecured debt rated 'BBB+' by Fitch) to MidAmerican Energy Holdings Company (MEHC; senior
unsecured debt rated 'BBB' by Fitch) is not a factor in the rating downgrade. In fact, Fitch views the change in
ownership, if approved by regulatory authorities as expected by the end of March 2006, as a stabilizing factor
for PPW's credit profile. Conversely, if the proposed sale to MEHC were to fail , the result would be
uncertainty as to the future ownership ,of PPW, which in Fitch's view would be a negative credit development.
The Stable Outlook also anticipates the equity infusion of approximately $300 million net of dividends from its
direct parent, PacifiCorp Holdings, Inc. (PIll), during the 2006 fiscal year. PPW is a direct subsidiary of Pill
which is a wholly-owned subsidiary ofSP.
PPW's operating cash flow has been challenged by a lack of regulatory support and low returns in its six-state
service territory and below normal hydroelectric conditions in five of the past six years (recent winter
2005-2006 precipitation statistics imply significantly improved hydrogenation in 2006). Fitch continues to
view regulation as a primary risk for PPW fixed income investors and recognizes progress made by SP
management in improving its relations with its regulators. Moreover, Fitch assumes progress in this area will
continue under new ownership. Regulatory progress is evidenced by constructive outcomes in PPWs
multi-state process, the February 2005 Utah Public Service Commission GRC order authorizing a $51 million
rate increase, legislation enacted in Utah adopting a forward test year, and the pending power cost adjustment
mechanism filings in Oregon, Washington and Wyoming.
However, the Oregon Public Utilities Commission s (OPUC) September 2005 order incorporating recently
enacted tax legislation (Senate Bill 408) in PPW's Oregon GRC is a serious matter for concern in Fitch's view.
The OPUC has granted PPW's motion to rehear the order in its GRC with respect to the incorporation of
Senate' Bill 408 , which reduced the $52 million rate increase contemplated under settlement agreements
reached by PPW with intervener groups to approximately $26 million. Rehearing proceedings are scheduled
through May 2006, which together with the outcome of the Senate Bill 408, permanent rule making process
will affect PPW's future earnings and cash flows.
The agreed sale ofPPW by SP for approximately $9.4 billion to MEHC, including the assumption of $4.3
billion of net debt and preferred stock, announced May 24, 2005, has received clearance under Hart Scott
Rodino and the approval of the Federal Energy Regulatory Commission and the Nuclear Regulatory
Commission. Settlement agreements have been reached with the relevant parties in all six states PPW serves. .
The Utah Public Service Commission unanimously approved the acquisition ofPPW by MERC and issued its
order Jan. 27, 2006. The Wyoming Public Service Commission has also approved the transaction and a final
written order will be issued and become effective Feb. 10 2006.
Contact: Philip Smyth, CFA [phone] or Karen Anderson [phone], New York.
Media Relations: Brian Bertsch, New York, Tel: [phone].
Fitcp's rating definitions and the terms ofuse of such ratings are available on the agency's public site,
'www.fitcbratings.com . Published ratings, criteria and methodologies are available from this site, at all times.
Fitch's code of conduct, confidentiality, conflicts of interest, affiliate fll'ewall, compliance and other relevant
policies and procedures are also available from the 'Code of Conduct' section of this site.
. .
Spmmary: PacitiCorp
--un""
STA;.J nARD
, 8.POOlfS
page 1 of J
CLO
mmI
Summary: PacifiCorp
Primary Credit Analyst:
Anne Salting, San Francisco (1) 415-371-5009;
a nne - setting ~sta nd a rd andpoors.com
j Quick Links
Rationale
Publication date: 30.Jan-O8, 17:03:00 EST
Reprinted from RatingsDirect
Rationale
The '1\-' corporate credit rating (CCR) on PacifiCorp reflects the
consolidated credit quality of the uti&ty's ultimate parent, Scottish
Power pic (A-/Stable/A-2). PacifiCorp s ratings remain on
CreditWatch with negative implications following the May 2005
announcement that the utility would be acquired by MidAmerican
Energy Holdings Co. (MEHC; BBB-IWatch Positive/-) for $9.
bilUon, consisting of $5.1 billion in equity and the assumption of
net debt and preferred stock of $4.3 billion. The acquisition will
be financed at the MEHC level, predominantly with equity. While
final regulatory approval in each of the states PacifiCorp serves
is pending, current indications suggest that the transaction may
close on or before March 31 , 2006.
MEHC has committed to regulators that it will structurally
separate or "ring fence" PacifiCorp from MEHC. If PacifiCorp
meets Standard & Poor's ring-fencing criteria, once the sale is
completed, PacifiCorp s CCR could be higher than MEHC's CCR
but it would also reflect its standalone credit quality. The
CreditWatch with negative implications indicates that PacifiCorp
standalone financial memes are weak for its current '' CCR.
Under the settlements negotiated, MEHC has agreed to forgo
dividends from PacifiCorp if PacifiCorp s common equity ratio is
below 48.25% from the closing date of the transaction through
Dec. 31, 2008. Other commitments include credits of up to
$142.5 million Of adopted by all states) that will reduce retail
rates through 2010 to the extent that PacifiCorp does not achieve
identified coSt reductions or demonstrate mitigation of certain
risks to customers.
PacifiCorps satisfactory business profile score (a '5' on a 10-
point scale, with '1' being the strongest) reflects a predominantly
coa~fired generation fleet that in fiscal 2005 (ended March 31)
provided about 70% of retail energy requirements (power
purchases constitute about 21 %, with hydro and natural gas
providing the remaining balance), competitive retail rates, and
progress in adjudicating rate cases to ensure that rates reflect
current costs, which should improve the company s return on
equity (ROE), that has consistently been below authorized levels.
The ultimate outcome of the pennanelit rules related to Oregon
Senate bill 408, passed in the fall of 2005, may have implications
for PacifiCorp s earnings and cash flow. The current expectation
is that pennanent rules will be implemented during this summer.
In the last quarter, PacifiCorp and MEHC have negotiated two
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Summary: PacifiCorp
key proposed settlements in Oregon and Utah that support the
acquisition. Recently, it was announced that Wyoming and
Washington have also completed settlements, meaning that
settlements now exist in all six states. The setUements contain
most favored nation" clauses by which any state may ask the
company to provide it with the terms and conditions negotiated in
another. Final approval will require commission votes in all six
. states, which is scheduled to occur by the end of February. The
Federal Energy Regulatory Commission (FERC), the Nuclear
Regulatory Commission, and the Department of Justice (DOJ)
have all approved the transaction. Berkshire Hathaway is
expected to soon file its request with the DOJ seeking early
termination of the waiting period for its conversion of MEHC
convertible preferred stock.
Short-term rating factors.
Until the transaction closes, PacifiCorps short-term ratings
are based on the '2' short-term ratings on Scottish Power
pic and Scottish Power U.K. and reflect the expectations that,
in the short term, the companies are expected to have ample
internal Dquidity. This is due to the steady, predictable net
cash flow stream produced by the groups regulated
businesses, the group s minimal debt maturities over the next
few years, and Scottish Power's ample credit facility capacity.
Cash and other short-term deposits, which amounted, to about
i:920 million ($1.16 bimon) at Sept. 30,2005, are held in a
variety of quickly accessible funds. Full capacity exists under
a $500 mimon revoMng credit faciDty due in 2010.
PacifiCorp currently provides for its own liquidity needs. Its
cash and cash equivalent position was $123.4 million as of
Sept. 30, relative to $199 million as of year -end fiscal 2005. In
addition, it has an $800 million commercial paper program,
with $296 milion outstanding at the end of the third quarter.
The program is backstopped by a revolving credit agreement
that terminates in August 201 O. As of Sept. 30, the facility was
un-utilized and fully available.
The purchase agreement specifies that Scottish Power, via
PacifiCorp Holdings Inc. (PHI), make a common equity
contribution to PacifiCorp in quarterly amounts that total $500
million for fiscal 2006. Considering the contributions against
expected dividends, which are capped in the acquisition
agreement, the net cash equity contribution the utility is
expected to receive from Scottish Power via PHI is about
$285.2 million. In contrast, in fiscal 2005, PacifiCorp
dividends paid to PHI totaled about $193 million, and no
equity contributions were received.
Future maturities of $120 million during the second half of
fiscal 2006 are in line with historic obligations. At Sept. 30
(which is halfway through Scottish Power's fiscal year),
PacifiCorp s capital expenditures totaled $470 million. The
utility has indicated that it expects total fiscal 2006 capital
expenditures to be about $1.1 billion. The acquisition
agreement requires capital expenditures consistent with
PacifiCorps budget.
'1-back to tOD I
Page 2
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~ummary: PacifiCorp Page 3 of 3
DIsclaimers Privacy Notice Terms or Use Regulatory DIsclosures Site Map Help
Copyright (c) 2006 Standard & Poor , a division of The McGraw-Hili Companies, Inc. All rights reserved.
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MOODY'S PLACES MIDAMERICAN ENERGY HOLDINGS COMPANY (Baa3 SR. ...Page 1 of3
4it
....... 1II...1an
..",...
Global Credit Research
Rating Action
23 JAN 2006
Rating Action: PacifiCorp
MOODY'S PLACES MIDAMERICAN ENERGY HOLDINGS COMPANY (88a3 SR. UNSEC.) AND TWO
SUBSIDIARIES UNDER REVIEW FOR POSSIBLE UPGRADE
Approximately $5 Billion of Debt Securities Affected
New York, January 23 2006 - MoodY's Investors Service placed the ratings of MidAmerican Energy
Holdings Company (MEHC), including its Baa3 senior unsecured debt, under review for possible upgrade.
Moody's also placed the ratings of subsidiaries MidAmerican Energy Company (MEC), A3 senior unsecured
and MidAmerican Funding (MF), Baa1 senior unsecured, under review for possible upgrade. The ratings of
the other subsidiaries of MEHC are unaffected.
The review reflects the growing likelihood that the acquisition of PacifiCorp, rated Baa1 senior unsecured, will
be concluded in the near future. The review also incorporates expectations that the voting ownership of
Berkshire Hathaway Inc., rated (P)Aaa senior unsecured, will increase substantially when restrictions under
the Public Utility Holding Company Act (PUHCA) are eliminated next month. These pending changes are
expected to improve the credit profile of MEHC for the following reasons:
1) The acquisition of PacifiCorp in a predominantly equity financed transaction will result in stronger
consolidated financial ratios;
2) The addition of a substantial subsidiary will increase the diversity and stability of cash flows from regulated
operations;
3) PacifiCorp s operations in the Northwest complement MEC's business in the Midcontinent region, and will
diversify regulatory risk and weather volatility for the core utility operations of MEHC. The transaction is
expected to result in a consolidated organization with a more diversified customer base, service territory, and
generation portfolio.
4) Following the elimination of PUHCA in February 2006, Berkshire Hathaway is expected to increase its
voting ownership from under 10% to 86., causing MEHC to become a consolidated subsidiary for
reporting purposes.
The review of MEC's ratings reflects the expected credit improvement of MEHC and the potential for
decreased reliance upon MEC as a source of upstream dIvidends to MEHC when PacifiCorp becomes an
additional subsidiary. MEC's stand-alone financial ratios could support a rating that is one notch higher, but
its current A3 senior unsecured rating has been constrained by the Baa3 rating of MEHC and the importance
of MEC as a potential source of upstream dividends to MEHC. The rating of MF is under review due to the
potential for an upgrade of MEC. As an intermediate holding company, MF relies upon dividends that are
upstreamed from MEC.
MEHC will acquire PacifiCorp from Scottish Power pic (SP), rated Baa1 senior unsecured, for $9.4 billion,
including $5.1 billion in cash and the assumption of about $4.3 billion of net debt. A majority of the $5.1 billion
cash portion of the transaction will be funded through an equity contribution to MEHC from Berkshire
Hathaway, resulting in an improvement in MEHC's balance sheet leverage. In addition, the terms of the
existing zero coupon convertible preferred stock, which was designed to prevent Berkshire Hathaway from
becoming subject to the Public Utility Holding Company Act (PUHCA), provide for conversion to common
equity following the repeal of PUCHA.
The Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the Securities and
Exchange Commission, and the Department of Justice have provided approvals for the acquisition of
PacifiCorp. The transaction also requires final approval by six state utility regulatory commissions: Oregon
Utah, California, Idaho, Washington and VVyoming. MEHC has reached agreement with the staff of the six
http://www.moodys.com/moodysicust/research/mdcdocs/23/20052000004240 11.asp?sourc... 1/24/2006
MOODY'S PLACES MIDAMERICAN ENERGY HOLDINGS COMPANY (Baa3 SR. ...Page 2 of 3
state commissions. Although closing of the merger appears likely in the near future, MEHC has also stated
that failure to obtain satisfactory resolution of pending tax law (SB408) issues in Oregon could delay the
closing of the transaction.
The review will focus on the potential for improvement in financial metries and business risk as a result of the
pending acquisition of PacifiCorp, including the degree to which cash flow volatility will be reduced by the
PacifiCorp transacti~n. In connection with the elimination of PUHCA in February, the review will also assess
whether the change In MEHC's relationship with Berkshire Hathaway justifies any lift to the rating based upon
an increased potential for support from the parent. The outcome of the review process is likely to result in a
one or two notch upgrade of MEHC.
The ratings of PacifiCorp are unchanged. PacifiCorp continues have a developing rating outlook due to
uncertainty about its on-going ownership in the event that the MEHC transaction fails to secure the remaining
regulatory approvals and close as expected, since the current owner has clearly stated its intention to divest
PacifiCorp. The company also faces a need for substantial capital spending over the next few years.
MidAmerican Energy Holdings Company is based in Des Moines, Iowa, and is a privately-owned global
provider of energy services. The company provides electric and natural gas services to 5 million customers.
New York
Daniel Gates
Managing Director
Corporate Finance Group
Moody's I nvestors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Richard E. Donner
Vice President - Senior Analyst
Corporate Finance Group
Moody's I nvestors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
cg Copyright 2006, Moody's Investors Service, I nc. and/or its licensors including Moody's Assurance Company, Inc.
(together
, "
MOODY'). All rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMmED , TRANSFERRED, DISSEMINATED
REDISTRIBUTED OR RESOLD , OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRffiEN CONSENT. All
information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty
of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness
completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall
MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or
relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or
any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis
interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential
compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in
advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings
and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be
construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any
securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY
MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any
investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly
make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for
each security that it may consider purchasing, holding or selling.
MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and
commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for
appraisal and rating services rendered by it fees ranging from $1,500 to $2,400 000. Moody s Corporation (MCO) and its wholly-
owned credit rating agency subsidiary, Moody s Investors Service (MIS), also maintain policies and procedures to address the
independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors
of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an
ownership interest in MCO of more than 5%, is posted annually on Moody s website at www.moodys.com under the heading
Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy.
http://www.moodys. com/moodys/ custlresearch/mdcdocs/23/20052000004240 11.asp?sourC...1/24/2006
. MUUDY':S PLACh:S MlVA.MJjK.lLAN ~N~Kur .t1ULUli'lU;:) LUMYAl'l I ~JjaaJ ;:)K. ...
Moody s Investors Service Ply Limited does not hold an Australian financial services licence under the Corporations Act. This
credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You
should, before acting on the opinion, consider the appropriateness of the opinion having regard to your own objectives, financial
situation and needs.
http://www.moodys.com/moodys/ cust/research/mdcdocs/23/2005 2000004240 II.asp? sourc.. .
rage j or j
1/24/2006
PacifiCorp Page 1 of2
tlt
111111"" "11"""
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Global Credit Research
Uquidity Risk Assessment
22 DEC 2005
Uquidity Risk Assessment: PacifiCorp
PacifiCorp
Portland, Oregon, United States
Broad Industry:
Specific Industry:
Short Term Rating:
Contacts
Public Utility
UtilitylDiversified Holding CompanyP~
Analyst
J. SabatelielNew York
Kevin G. Rose/NewYork
Daniel GateslNew York
Phone
212.553.1653
Opinion
PacifiCorp s Prime-2 short-term rating for commercial paper reflects the predictable cash flow of this well-
positioned vertically integrated utility. Operating cash flow has strengthened over the past few years due to thereceipt of favorable regulatory decisions relating to recovery of purchased power costs. Operating cash flow is
being used to finance a growing capital expenditure program intended to enhance reliability and supply
requirements for the utility's service territory.
During fiscal year 2005 (March 31st), cash from operations of about $711 million covered nearly 68% of
PacifiCorp s outlays, including capital expenditures incurred at the utility and the payment of dividends. For 12
months encing September 30, 2005. cash from operations increased to $752 million, representing nearly 63% of
the company s requirements. PacifiCorp has met the remaining funding requirements through the incurrence of
short-term debt, principally commercial paper, and from equity provided by PaciliCorps parent, PacifiCorp
Holdings, Inc. (PHI).
On May 23, 2005, ScottishPower (SP) and PHI executed a Stock Purchase Agreement providing for the sale of
all PacifiCorp common stock held by PHI to MidAmerican Energy HOldings Company (MidAmerican) for about
$9.4 billion, consisting of approximately $5.1 billion in cash plus approximately $4.3 billion in net debt and
preferred stock, which will remain outstanding at PacifiCorp. The closing of the sale of PacifiCorp is subject to a
number of conditions, including approvals from various state and federal regulatory authorities. Pursuant to the
Stock Purchase Agreement, SP has agreed that dividends paid by PacifiCorp to PHI will not exceed $214.
million in the aggregate during fiscal 2006, and $242.3 million in the aggregate during fiscal 2007. Additionally.
while the sale of PacifiCorp is pending and the Stock Purchase Agreement is in effect, PHI has agreed to make
common equity contributions to PacifiCorp totaling $125 million at the end of each quarter in fiscal 2006 and
$131.25 million at the end of each quarter in fiscal 2007.
PacifiCorp had outstanding commercial paper of $296 million and $468 million as of September 30. 2005 and at
March 31, 2005, respectively. PacifiCorp s short-term borrowings and other financing arrangements are supported
by an $800 million revolving credit agreement, which expires in August 2010. Additionally, PacifiCorp s shelf
registration totaling $700 million for 1st mortgage bonds and unsecured debt: was approved by the SEC and was
unutilized as of September 2005. Uquidity is further enhanced by the companys cash and cash equivalents
totaling $123 million and $199 million as of September 30 2005 and at March 31 , 2005, respectively.
PacifiCorp relies upon its revolving credit agreement to backstop its commercial paper program and for daily
liquidity requirements, if any. for $38 million of unenhanced pollution control revenue bonds. The facility does not
contain rating triggers that would cause acceleration or make the facilities unavailable, but does contain rating
sensitive pricing. The facility contains a financial covenant that limits debt to 65% of total capitalization while other
financing arrangements limit the company to a debt to capital ratio of 60%. The company plans on seeking
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yacmcorp Page 2 of 2
amendments,to the other financing arrangements to increase the debt to capital ratio limit to 65%. As of
September 30, 2005, PacifiCorp was in compliance with both limits.
As of September 30, 2005, PacifiCorp also had $517.8 million of standby letters of credit and standby bond
purchase agreements to provide credit enhancement and liquidity support for pollution-control revenue bonds.These facilities expire periodically through the year ending March 31 , 2010.
(9 Copyright 2005, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.(together
, "
MOODY'). A/I'rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED TRANSFERRED DISSEMINATED
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN' WHOLE OR IN PART, IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRmEN CONSENT. Allinformation contained herein is obtained by MOODY'S from sources believed by it to be .accurate and reliable. Because of thepossibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warrantyof any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness
completeness, merchantability or fitness for any particular purpose of any such information. Under ,no circumstances shall
MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or
relating to, any error (negligent or otherwise) or other Circumstance or contingency within or outside the control of MOODY'S orany o~ its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis,
interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential
compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in
advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings
and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be
construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any
securities. NO WARRAN'TY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY
MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any
investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly
make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for
each security that it may consider purchasing, holding or selling.
MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and
commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for
appraisal and rating services rendered by it fees ranging from $1,500 to $2,400 000. Moody s Corporation (MCO) and its wholly-
owned credit rating agency subsidiary, Moody s Investors Service (MIS), also maintain policies and procedures to address the
independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors
of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an
ownership interest in MCO of more than 5%, is posted annually on Moody s website at www.moodys.com under the heading
Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy.
Moody s Investors Service pty Limited does not hold an Australian financial services licence under the Corporations Act. This
credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You
should , qefore acting on the opinion, consider the appropriateness of the opinion having regard to your own objectives, financial
situation and needs,
http://www.moodys. com/moodys/custlresearch/mdcdocs/04/200 17000004123 88.asp?sour...12/22/2005
PacifiCorp Page 1 of3
Global Credit Research
Credit Opinion
21 DEC 2005118."'. "'"1"""
Credit Opinion: PacifiCorp
PacifiCorp
Portland, Oregon, United states
Ratings
Category
Outlook
Issuer Rating
First Mortgage Bonds
Senior Secured
Senior Unsecured MTN
Subordinate Shelf
Preferred Stock
Commercial Paper
Parent: Scottish Power pic
Outlook
Issuer Rating
Sr Unsec Bank Credit Facility
Senior Unsecured
Utah Power & Light Co
Outlook
Preferred Stock
Moody s Rating
Developing
Baa1
Baa1
(P)Baa2
Baa3
Stable
Baa1
Baa1
Baa1
Developing
Baa3
Contacts
Analyst
A.J. SabateilelNew York
Kevin G. Rose/NewYork
Daniel Gates/New York
Phone
212.553.1653
Key Indicators
PacifiCorp
2005 2004 2003 2002
Funds from Operations Adjusted Debt (1)18.20.17 .'r'lo
Retained Cash Flow / Adjusted Debt (1)14.16.17.-0.
, Common Dividends / Net Income Available for Common 77%66%00/0 99%
Adjusted Funds from Operations + Adjusted Interest 4.10
/ Adjusted Interest (2)
Adjusted Debt! Adjusted Capitalization (1)(3)57.55.56.60.
Net Income Available for Common Common Equity 4.1%10.
(1) Debt is adjusted for operating leases, guaranteed preferred beneficial interests in company s junior sub, and
debentures & preferred stock subject to mandatory redemption. (2) Adjusted Interest reflects adjustments for
operating leases and preferred stock dividends. (3) Adjusted Capitalization reflects the adjusted debt.
Note: For definitions of Moodys most common ratio terms please see the accompanying Users Guide.
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.Paclh Corp .page :l
Opinion
Credit Strengths
PacifiCorp s credit strengths are:
Low-cost generating assets and extensive transmission network through the western US
Recent key regulatory decisions have mostly been constructive
While credit metrics lag relative to similarly rated peers, recent rate increases are expected to improve crecflt
metrics.
Rnancing plan contemplates substantial equity support
Credit Challenges
PacifiCorp s credit challenges are:
Regulatory uncertainty still remain due to numerous rate applications pending
Future capital expenditures will increase materially
Six state utility network creates regulatory challenges
Financial performance can be affected by hydro levels in the Pacific Northwest
Rating Rationale
The Baa1 senior unsecured rating of PacifiCorp reflects the relative predictability of cash flows expected from a
well-positioned, vertically integrated utility, and an affiliation with parent, Scottish Power, pic, (SP) who has
implemented operational efficiencies, and has fortified relations with the state regulators. The rating also considers
the company s reasonably succesful efforts to raise rates which improve regulated returns and sustainable cash
flow and can support an increasing capital budget over the next several years. While regulatory challenges remain
for PacifiCorp, the rating incorporates an expectation that the company will continue to maintain constructive
regulatory relationships during this important period.
The rating also considers the announcement by MidAmerican Energy Holdings Company (MEHC) to acquire
PacifiCorp from SP for $9.4 billion, including $5.1 billion in cash and the assumption of around $4.3 billion of
PacifiCorp net debt and preferred stock. The rating considers the expected continuation of equity support from SP
prior to the completion of the acquisition and factors in the belief that MEHC will manage PacifiCorps business
including its future capital structure, in a way that is supportive to credit quality.
Rating Outlook
PacifiCorp s rating outlook is developing. While Moody's views the acquisition of PacifiCorp by MEHC to have long-
term positive benefits, particularly given the size of the capital investment program, the developing rating outlook
incorporates the near-term potential for new regulatory challenges for PacifiCorp as the merger-related approval
process in each of the six states could affect the timing and the outcome of a number of important rate cases that
are underway throughout the company s six state jurisdiction. Most of the current rate cases have the potential for
PacifiCorp to obtain some form of rate increase, which collectively will enhance the company s returns and cash
flow as the utility increases its capital investment To the extent that the merger approval process, substantially
affects the timeliness or the amount of rate recovery currently being pursued by PacifiCorp, the company s credit
quality could, in the near-term, be negatively affected.
This near-term concern is balanced against the longer-term benefits to PacifiCorp s bondholders of ownership by
MEHC, which is 80.5% owned by Berkshire Hathaway. and considers MEHC's successful track record in operating
other regulated utility businesses as well as our belief that the potential new owners are likely to take a long-term
view towards enhancing returns at PacifiCorp.
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Paclti Corp Page 3 of 3
Mo~dy's ~II m~n~tor the merger ~pproval process at the state and federal level and assess the impact, if any, on
PacifiCorps existing regulatory filings, as well as the final form in which MEHC intends to finance this acquisition.
To the extent that the merger related regulatory proceedings do not meaningfully affect the timeliness or the
outcome of state regulatory proceedings currently underway, the PacifiCorp rating outlook could stabilize.
What Could Change the Rating - UP
VVhile the size of the capital expenditures limit the prospects for a rating upgrade at PacifiCorp in the near-term, the
rating could be u~raded ov:r the intermediate term if the company s capital expenditure program continues to be
~nanced conservativ~ly an~ if rea~onable ~egulatory support is secured on a timely basis resulting in an
Improvement In credit metncs. This would Include PacifiCorp s funds from operations (FFO) to total adjusted debt
being in excess of 20% on a sustainable basis and its FFO to adjusted interest expense being in excess of 4. Ox on
a sustainable basis.
What Could Change the Rating - DOWN
Given the size of PacifiCorp s capital program and the ratings reliance on ongoing regulatory support, the rating
could be downgraded if timely regulatory support is delayed or materially 8ffected due to the merger related
regulatory approvals.
~ Copyright 2005, Moody s Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.
(together
, "
MOODY'). All rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT lAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMmED, TRANSFERRED, DISSEMINATED
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRmEN CONSENT. All
information conta ined herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty
of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness
completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall
MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or
relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or
any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis,
interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential
compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in
advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings
and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be
construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any
securities. NO WARRANTY. EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULARPURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY
MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any
investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly
make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for
each security that it may consider purchasing, holding or selling.
MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and
commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for
appraisal and rating services rendered by it feesranging from $1 500 to $2,400,000. Moody s Corporation (MCO) and its wholly-
owned credit rating agency subsidiary, Moody s Investors Service (MIS), also maintain policies and procedures to address the
independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors
of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an
ownership interest in MCO of more than 5%, is posted annually on Moody s website at www.moodys.com under the heading
Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy.
Moody s Investors Service Pty Limited does not hold an Australian financial services licence under the Corporations Act. This
credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You
should, before acting on the opinion, consider the appropriateness of the opinion having regard to your own objectives, financial
situation and needs.
http://www.moodys.com/moodys/ custlresearchlmdcdocs/27 120029000004 28342.asp ?sour. . 12/22/2005