20090414Compliance Filing.pdf

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Pac Po I
Rocky Mountn Por I
PaiC Ener
825 NE Multom. Suite 190 LeT
Portand. Oregon 9722April 14,2009 2U09 APR 14 Ati 10: 14
VI OVERNIGHT DELIVERY
Idaho Public Utilities Commssion
472 West Washigton
Boise, ID 83702-5983
Attention:Ms. Jean D. Jewell
Commission Secreta
Re: Idaho Docket No. PAC-E-ØS-08 Compliance Filng
To the Idaho Public Utilities Commission:
PacifiCorp submits the attchments in compliance with the Commssion's Order in ths case
issued on Februar 13,2006 and amendèd on March 14,2006. The Order approved the
Stipulation supporting the acquisition ofPacifiCorp by MidAerican Energy Holdings
Company.
Commitment 120 of the Stipulation provides that PacifiCorp will provide to the Commssion, on
an inormational basis, credit rating agency news releases and final reports regarding PacifiCorp
when such reports are known to PacifiCorp and are available to the public.
Therefore, in compliance with Commitment 120 of the Stipulation, please find the attched
reports related to PacifiCorp.
Very trly yours,.~ lJ lJ
Bruce N. Wiliams
Vice President and Treasurer
Enclosure
Research Update:
Various Rating Actions Taken On
MidAmerican Energy And Units
After Strategy Review
Primary Credit Analyst:
Anne Selting, San Francisco (1) 415-371-5009;anne_selting~standardandpoors.com
Table Of Contents
Rationale
Outlook
Ratings List
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Research Update:
Various Rating Actions Taken On
MidAmerican Energy And Units After Strategy
Review
Rationale
On March 27, 2009, Standard & Poor's Ratings Services lowered its corporate
credit rating on MidAmerican Energy Holdings Co. (MEHC) to 'BBB+' from 'A-'
and affirmed the company's senior unsecured ratings at 'BBB+'. We also
affirmed the 'A-' corporate credit ratings and long-term debt ratings of
MEHC's regulated electric and gas utilities, PacifiCorp and MidAmerican Energy
Co. (MEC), as well as the 'A-' corporate credit rating and 'BBB+' senior
secured rating of MEC' s intermediate holding company, MidAmerican Energy
Funding LCC.
In addition, Standard & Poor's raised the senior secured debt rating for
PacifiCorp one notch to 'A' from 'A- i and revised the recovery rating on that
debt to '1+' from '1'. We lowered the short-term ratings of PacifiCorp and MEC
to 'A-2' from 'A-I'. We also affirmed the 'A' corporate credit rating and
senior unsecured rating assigned to Northern Natural Gas Co., MEHC' s Midwest
interstate FERC-regulated pipeline and the 'A-' senior secured project rating
assigned to interstate pipeline Kern River Gas Transmission Co.
We removed all ratings from CreditWatch with negative implications, where
we placed them on Sept. ia, 200a. The outlook for all entities is stable.
The CreditWatch resolution for the MidAmerican family completes our
review of the firm's business and financial strategy. We note that our rating
actions today are independent of Standard & Poor's March 24 announcement that
placed MEHC' s majority owner Berkshire Hathaway Inc.' s 'AA' /' A-1+' ratings on
negative outlook.
While the majority of MEHC' s cash flows needed to service its debt stems
from its regulated energy investments that are in the 'A' category, the
insulation we accord those regulated entities constrains MEHC' s ability to
access cash flows from its regulated subsidiaries to service its own debt. For
this reason, MEHC's debt ratings and the corporate credit rating are below the
stand-alone credit quality of its regulated subsidiaries.
The one notch upgrade to 'A' for PacifiCorp' s first mortgage bonds reflects
our review of the company's unique indenture, which has both an earnings and
bondable property test. The upgrade reflects that, consistent with our
criteria, we expect that if a default occurs, PacifiCorp' s collateral coverage
available to first mortgage bondholders would be at least 1. 5x.
The lower short-term credit ratings of PacifiCorp and MEC reflect our
view that while MEHC and its subsidiaries are supported by a $3.5 billion
contingent equity agreement between MEHC and Berkshire, the agreement is not a
source of instantaneous liquidity. The agreement allows Berkshire up to iao
days to fund MEHC's request. Given the recent turmoil in both liquidity and
capital markets, we have taken a firmer view on the need to link PacifiCorp
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Research Update: Various Rating Actions Taken On MidAmerican Energy And Units After Strategy Review
and MEC's short-term ratings to their stand-alone credit quality, which
supports an 'A-2' short-term rating. As per our criteria, we typically assign
an 'A-2' short-term rating to companies with an 'A-' corporate credit rating.
Despite this change, we would note that we continue to view PacifiCorp and MEC
as having sound liquidity. And while Berkshire contractually has up to six
months to respond to an MEHC call for liquidity, it has strong economic
incentives to do so, given that Berkshire owns 88% of MEHC's common stock on
an undiluted basis.
The ability of MEHC to tap up to $3.5 billion of equity through its
agreement with Berkshire is an important source of ratings support to MEHC,
and improves our view of MEHC i S default risk given its debt leverage and
aggressive financial profile. We continue to view Berkshire as a strong owner
of MEHC, and consider its ability to meet any MEHC call on its equity as
uncompromised. Our ratings also reflect confidence that the commitments MEHC
and Berkshire have made to extend the agreement, which expires in February
2011, will be honored if MEHC' s financial profile has not improved to warrant
its stand-alone rating.
The resolution of the CreditWatch listing reflects the completion of our
review of MEHC and its family of companies following MEHC' s $4.7 billion bid
to purchase Constellation Energy Group (CEG¡ BBB/Watch Neg/A-2), which was
terminated at the end of 2008. Despite the fact that the acquisition did not
proceed, MEHC' s decision to acquire CEG and its merchant assets triggered the
need to reassess of MEHC' s business strategy , given its willingness to acquire
a company with substantially more business risk than its existing holdings.
Our view continues to be that MEHC i s business risk is i excellent.' About
95% of MEHC' s 2008 EBITDA stems from regulated businesses. Still, we expect
MEHC to continue with its strategy of growth through acquisitions. As
evidenced by the company's bid for CEG, we no longer presume that future
acquisitions will be confined to regulated energy assets. This has been an
important underpinning to MEHC' s credit ratings, which remain strongly
investment grade despite MEHC's aggressive stance toward its financial policy.
With debt to total capitalization of 64%, funds from operations (FFO) to
interest coverage of 3. lx, and FFO to total debt of 13%, our opinion is that
MEHC is not well positioned at the current rating level of 'BBB+' to add
incremental business risk without a commensurate strengthening of its
financial profile.
Ratings degradation at the MEHC level is highly likely if increased
business risk is not offset by company efforts to insure that any acquisition
improves its financial profile. We would expect that such improvements would
require additional and direct equity investment from parent Berkshire or be
achieved by other means that meaningfully shore up MEHC' s financial profile.
Assuming MEHC can't identify strategic assets that fit with its investment
criteria and remains a company strictly devoted to managing regulated
investments, we would expect the contingent equity arrangement to remain in
place while MEHC slowly works toward paying down debt, particularly at the
parent levels, where $5. i billion in debt resides, or about 25% of the
consolidated debt outstanding. We think it is reasonable to assume this is
occur, and point to the steady progress MEHC has made on this front over the
years.
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Research Update: Various Rating Actions Taken On MidAmerican Energy And Units After Strategy Review
Short-term credit factors
MEHC's liquidity is solid. Cash and cash equivalents were $280 million at
year-end 2008 on a consolidated basis. The parent maintains two credit
facilities totaling $835 million, $250 million of which expires in November
2009. Borrowings against these facilities totaled $216 million as of Dec. 31,
2008. These resources compare with expected 2009 parent debt and subordinated
trust preferred interest payments of about $400 million.
MEHC's subsidiaries maintain their own revolvers, with the exception of
Northern Natural Gas and Kern River, which rely on operating cash flow to
support their stand-alone debt obligations, which we view as adequate, given
the stable operating cash flow the companies have consistently produced. On a
consolidated basis, the company meets our credit and combined credit and
market stress events, comfortably achieving more than 1. Ox for each metric.
PacifiCorp has the largest liquidity requirement to manage its collateral
requirements under power purchase and sale agreements. MEHC' s subsidiaries
have maintained strong access to the bond financing market. PacifiCorp issued
$1 billion in notes in January 2009, and $800 million in July 2008. Northern
Natural Gas issued $200 million in July 2008.
MEHC has no major maturities in 2009 and 2010 at the parent level. In the
third quarter of 2008, MEHC sizably increased its subordinated debt
obligations to Berkshire by $1 billion, issuing 11% mandatory redeemable
preferred securities to fund its investment in Constellation. But with the
termination of the agreement, the company repaid one-half of the Berkshire
note in December 2008 and the remaining balance in January 2009.
The company's liquidity position has been enhanced in 2009 by the CEG
termination, which should help offset borrowing needs. Net of its initial $1
billion investment, MEHC realized in 2008 $593 million in pre-tax cash
proceeds associated with a $175 million termination fee and cash paid to it by
CEG in lieu of shares. In 2009, it was repaid a $1 billion loan from CEG, and
to date has sold 5.1 million shares of CEG common stock of the 19.9 million
shares it also received from the company.
Consolidated maturities for the remainder of this year are modest at
about $480 million. MEHC parent debt and the debt of its regulated
subsidiaries are eligible for support from the Berkshire contingent equity
agreement. Under the agreement, proceeds may only be used to pay when due MEHC
debt obligations and fund the general corporate purposes of MEHC' s regulated
subsidiaries. MEHC cannot call upon the contingent equity to support mergers
or acquisitions.
Outlook
The stable outlook for MEHC and its subsidiaries incorporates our expectations
of steady progress toward paying down debt and improving its cash flow
metrics. The explicit $3.5 billion in contingent equity available to MEHC from
Berkshire also buoys credit quality. Upside ratings momentum could occur if
MEHC's regulated subsidiaries' financial performance improves. As the
company's largest holding, we look to PacifiCorp to bolster its credit profile
while completing a large capital program and also will examine MEC' s ability
Standard & Poor's RatingsDirect I March 27, 2009 4
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Research Update: Various Rating Actions Taken On MidAmerican Energy And Units After Strategy Review
to realize cash flows needed to repay the $525 million debt of MidAmerican
Energy Funding LLC. Ratings would be clearly pressured at the MEHC level if
the company's business risk goes up without a corresponding change in
financial policy; also, a change in Berkshire's attitude toward its energy
investments, in the form of reduction, expiration, or termination of the
contingent equity commitment would also meaningfully strain ratings.
Ratings List
Downgraded; CreditWatch/Outlook Action
To From
MidAmerican Energy Holdings Co.
Corporate Credit Rating BBB+/Stable/ --A- /Watch Neg/ --
MidAmerican Energy Co.
PacifiCorp
Commercial Paper
Local Currency A-2 A-1/Watch Neg
Ratings Affirmed; CreditWatch/Outlook Action; Downgraded
To From
MidAmerican Energy Co.
PacifiCorp
Corporate Credit Rating A- /Stable/A-2 A-/Watch Neg/A-1
Ratings Affirmed; CreditWatch/Outlook Action
To From
Northern Natural Gas Co.
Corporate Credit Rating A/Stable/ --A/Watch Neg/ --
MidAmerican Energy Holdings Co.
Senior. Unsecured BBB+BBB+/Watch Neg
CalEnergy Capital Trust II
Preferred Stock BBB-BBB- /Watch Neg
CalEnergy Capital Trust III
Preferred Stock BBB-BBB-/Watch Neg
Kern River Funding Corp.
Senior Secured A-/Stable A-/Watch Neg
MidAmerican Energy Co.
Senior Unsecured
Preferred Stock
A-
BBB+
A-/Watch Neg
BBB+/Watch Neg
MidAmerican Funding LLC
Senior Secured BBB+BBB+/Watch Neg
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Research Update: Various Rating Actions Taken On MidAmerican Energy And Units After Strategy Review
Northern Natural Gas Co.
Senior Unsecured A A/Watch Neg
PacifiCorp
Senior Unsecured
Preferred Stock
A-
BBB
A-/Watch Neg
BBB/Watch Neg
Upgraded; CreditWatch/Outlook Action
To From
PacifiCorp
Senior Secured
Recovery Rating
A
1+
A- /Watch Neg
1
Utah Power & Light Co.
Senior Secured A A- /Watch Neg
Complete ratings information is available to RatingsDirect subscribers at
ww.ratingsdirect.com. All ratings affected by this rating action can be found
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preferred country or region, then Ratings in the left navigation bar, followed
by Find a Rating.
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712211300126896
Pacifi orll
Primary Credit Analyst:
Anne Seltìng, San Francisco (1) 415-371-5009; anne_selting~standardandpoors.com
Table Of Contents
Major Rating Factors
Rationale
Outlook
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713330 130057291
PacifiCorp
Major Rating Factors
Strengths:
. Market and regulatory diversity afforded by PacifiCorp's electric utility
business, which serves portions of six western U.S. states;
. Retail electric rates compare favorably with those of other electric suppliers
operating in the states PacifiCörp serves, suggesting that the company may
be able to maintain its competitive advantage despite its ongoing need for
rate relief in the coming years to support a large capital program;
. The approval of a power cost adjuster in Wyoming (which is in place until
April 2011), combined with the use of a forward mechanism to set base fuel
and power costs in Oregon, as well as an existing mechanism in California
have improved the company's exposure to fluctuations in natural gas and
purchased power costs;
· The completion of 1,068 MW of new natural gas plants, along with wind
farm investment, is reducing the company's reliance on purchased power;
and
. A tentative resolution in the contentious Klamath hydro re-licensing case
has the potential to adequately address the company's financial exposure if
the project is decommissioned, as is now envisioned.
Corporate Credit Rating
A-lStablelA-2
Weaknesses:
. The absence of fuel and purchased power adjusters in Utah, Washington, and Idaho is material for the company
given that these states together provide about 55% of revenues; near-term prospects for obtaining one appear
limited in Washington and Utah. In October 2008, PacifiCorp filed for an adjuster in Idaho that is pending;
. Despite recent rate relief in nearly all states PacifiCorp serves, regulatory lag continues to allow only modest
improvement in the company's financial profie; its returns on equity (ROE) remain under authorized levels and
while leverage has improved since it was acquired by MidAmerican Energy Holdings Co. (MEHC) in 2006, cash
flow metrics continue to be weak;
. Regulators wil need to consistently support retail rate increases to recover PacifiCorp's planned capital
investments, although the recessionary environment has caused some scaling back of some capital plans;
. Growth in the percentage of generation provided by natural gas costs mitigates some of the company's potential
exposure to carbon regulation, but introduces greater potential for cost volatility, a credit consideration given
that the company lacks power adjusters in three of the six states it serves.
Rationale
The 'A-' corporate credit rating (CCR) on PacifiCorp reflects its 'excellent' business profile, evidenced by a diverse
and growing service territory, and an 'aggressive' financial profie that reflects a large capital program and the need
to shore up its cash flow metrics. While the ring-fenced utilty's credit metrics are more consistent on a standalone
basis with a 'BBB' category rating, Standard & Poor's Ratings Services expects that management wil achieve cash
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713330 1300572291
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PacifiCorp
flow metrics more consistent with an 'A' category rating over the next several years. PacifiCorp is owned by parent
MidAmerican Energy Holdings Co. (MEHC; BBB+/Stablel--). In turn, MEHC is privately held and majority owned
by Berkshire Hathaway (AAStable/A-1+), which at year-end had an 87.4% interest in MEHC on an undiluted
basis. (MEHC's remaining common equity is owned by Walter Scott (10.9%) and two members of MEHC's
executive management, Chairman of the Board David Sokol (0.7%) and President and Chief Executive Offcer Greg
Abel (1.0%)), MEHC has demonstrated a wilingness to deploy equity to support the utility's large capital program,
providing the utility with $865 milion in equity contributions since it purchased the company in March 2006.
MEHC's credit profie is supported by Berkshire, which has in place through February 2011 a $3.5 bilion equity
commitment agreement between itself and MEHC in which MEHC can unilaterally call upon to support either its
debt repayment or the capital needs of its regulated subsidiaries, including PacifiCorp. We view this agreement
between PacifiCorp's parent and a 'AA' rated entity to reduce the likelihood of a PacifiCorp default,
Nevertheless, we expect PacifiCorp to have a standalone credit profile consistent with its 'A-' rating. We take this
view because the utility has no right to cause MEHC to make an equity contribution, either from MEHC or via
Berkshire through an MEHC board request. While MEHC would typically have strong incentives to support the
utility by tapping the Berkshire contingent equity, we would note that in a catastrophic utility event, MEHC would
be expected to do so only if it were in the economic best interests of the parent. Such a scenario is remote and would
require an unprecedented event such as what occurred during the western energy crisis, when regulators refused to
allow utilities to recover power procurement costs.
PacifiCorp serves 1.7 milion customers in portions of six western states: Utah, Oregon, Wyoming, Washington,
Idaho, and California. The company operates as Pacific Power in Oregon, Washington, and California, and as
Rocky Mountain Power in Utah, Wyoming~ and Idaho. The company's two largest markets, Utah and Oregon,
comprised about 68% of the company's retail electric sales in 2008, with Wyoming and Washington at 24%, and
the balance being sold to customers in Idaho and California, As of Dec. 31,2008, the utility's long-term debt was
$5.5 bilion, Consolidated long-term debt at MEHC (which includes PacifiCorp's debt) was nearly $20 bilion as of
the same date,
Supportive rate case outcomes continue to be key to maintaining and improving upon the company's financial
performance. When MEHC purchased PacifiCorp in 2006 from ScottishPower, the utilty had consistently been
unable to earn its authorized return on equity (ROE), which varies by jurisdiction but ranges from 10.0% to 10.6%.
Management has focused on improving its returns, with some success. In 2008, our calculations suggest that the
consolidated ROE for PaciCorp was 8.3%. Regulatory lag remains an issue for the company, although the company
is permitted under state regulation to use forward test years for rate cases in Utah, Oregon, Wyoming, and
California. (Idaho and Washington require historical test years,)
PacifiCorp has power and fuel cost adjusters in Wyoming and California that allow for the deferral of these costs for
later collection. In Oregon, fuel and purchased power costs are updated in rates every January based on forecast
power prices, but there is no true-up to reconcile these projected costs with actuals. The company has pending
before the Idaho Public Utilities Commission a request to establish an energy cost adjustment mechanism to recover
the difference between base power costs set in a general rate case and actual power costs incurred.
Recent rate case activity includes a settlement reached in Utah in the company's 2008 general rate case for $45,0
milion, relative to the $57.4 milion sought, The Utah Public Service Commission has not yet ruled on the proposed
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PacifiCorp
settlement. Retail rate adjustments have been proposed to take effect in early May. In Wyoming, the commission
there recently approved the company's $18.0 milion settlement over its 2008 general rate case, relative to the $28.8
milion sought, with rates proposed to be effective in late May. In Idaho, the company received authorization to
implement its $4.4 milion rate case settlement, relative to the $5.9 milion it sought. The company did not have a
2008 general rate case in Oregon, but is expected to file its 2009 general rate case in Oregon in the first half of this
year. The company has submitted a 2009 general rate case request for $38.5 milion in Washington, which is
pending. Pro forma rate adjustments in California were made in January 2009 to address energy cost adjustments
and attrition adjustments.
In September 2008 the company purchased for $308 milion the Chehalis plant, a 520 MW combined-cycle plant
that wil now have to be authorized for recovery in current or future rate cases in all the states PacifiCorp serves but
California. The investment wil be part of the Washington and Oregon 2009 general rate cases and is part of
pending cases in Wyoming and Utah, which has pre-approved the purchase. The company also brought online 382
MW of new wind generation in 2008. Nevertheless, the company's supply portfolio continues to be predominately
coal, supplying about 65% of all requirements in 2008.
PacifiCorp completed $1.8 bilion in capital expenditures in 2008, up from $1.5 bilion spent in 2007. The company
is projected to spend $6.1 bilion in 2009 through 2011, excluding non-cash allowance for funds used during
construction. The largest component of PacifiCorp's capital program is the construction of the Gateway
transmission project, an estimated $6.1 bilion, 2,000-mile transmission line connecting portions of Wyoming, Utah,
Idaho, Oregon, and the southwestern U,S. The project is being completed in phases, with initial portions of new
lines being placed in service as early as 2010 and a completion date scheduled for 2018. About 38% of the
company's total capital budget over the next three years is devoted to transmission investment, of which Gateway is
a component. In 2008, the Federal Energy Regulatory Commission awarded the company incentive rate treatment of
200 basis points for seven of the eight project segments,
High fuel prices impacted PacifiCorp's 2008 results, as did hydro conditions that were about 90% of normal, but
nevertheless gross margins per megawatt hour sold remained roughly consistent relative to 2007, as did the
company's earnings before interest and taxes. Operating income increased about 7% due in large part to retail
revenues increases provided by regulatory rate relief and lower operations and maintenance expense. (Of the $198
milion in increased revenues in 2008 relative to 2007, about $102 millon was due to higher prices approved by
regulators, with most of the balance attributable to customer growth.) Cash flow from operations was greatly
boosted by deferred income taxes. For 2008, cash flows from operations rose $168 milion to $992 milion relative
to 2007, but the majority of this was attributable to the deferred income taxes. As a result, the company was able to
reflect a $308 milion add-back to cash flows. Retail and wholesale sales were roughly flat in 2008 relative to 2007,
and in late 2008 the company experienced declining sales volumes. Approximately 30%-32% of PacifiCorp's total
electric sales are to industrial customers, As a result, we would expect sales contraction could be a drag on 2009
performance, as industrial sales are more sensitive to the business cycle than is residential electric consumption.
Year-end leverage for the company was 53% and reflects new long-term borrowing in 2008 of $800 milion in July
2008, net of maturities, which resulted in total borrowing increasing about $469 milion, including short-term
balances. This was offset by $450 milion of equity contribution from MEHC. These equity investments wil be key
to maintaining a balanced capital structure throughout the company's capital program. Debt to total capitalization
reflects several adjustments we make, the largest of which include adding $424 milion for power purchase
obligations and $379 milion for post-retirement obligations. We expect that PacifiCorp wil not be in a position to
Standard & Poor's RatingsDirect I April 1 , 2009 4
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PacifiCorp
make distributions to its patent while it is executing its capital program and that MEHC wil manage PacifiCorp's
debt leverage downward to the range of 50% in the next several years.
Cash flow metrics continue to be weak for the rating but are improving modestly, Funds from operations (FFO) to
total debt was nearly 18% in 2008, up from 17% in 2007. FFO interest coverage was 4,Ox, versus 3.5x over the
same period. Going forward, we would expect PacifiCorp to produce FFO interest coverage in the range of
4.0x-4.5x and achieve FFO to total debt in the range of 20%.
Short-term credit factors
The company's liquidity position is strong. PacifiCorp's 'A-2' short-term rating considers our view that while
MEHC and its subsidiaries are supported by a $3.5 bilion contingent equity agreement between MEHC and
Berkshire, the agreement is not a source of instantaneous liquidity. The agreement allows Berkshire up to 180 days
to fund MEHC's request. Given the recent turmoil in both liquidity and capital markets, we have taken a firmer
view on the need to link PacifiCorp's short-term ratings to its stand-alone credit quality, which supports an 'A-2'
short-term rating. However, we would note that while Berkshire contractually has up to six months to respond to an
MEHC call for liquidity, it has strong economic incentives to do so,
PacifiCorp's cash and cash equivalents totaled $59 milion as of Dec. 31,2008. In addition, the company has
$1.395 billion in unsecured revolving credit structured in two separate agreements: an $800 milion line expiring
July 2013 and a $700 milion line extending through the end of October 2012. The company had borrowed $85
milion in short-term commercial paper at year-end and had letters of credit in place for $258 milion, leaving $1.0
bilion under its revolvers available. PacifiCorp's single largest exposure to any banks under its revolver as a
percentage of total commitments is 15%, which is manageable. Regulators limit PacifiCorp to having no more than
$ 1.5 bilion in debt outstanding.
In September 2008, due to the significant reduction in its market liquidity, PacifiCorp acquired $216 milion of its
insured variable-rate pollution control bonds, which it is currently holding on its balance sheet. These bonds are a
small component of the company's overall debt profile, and PacifiCorp can utilize its ample liquidity facility to
continue to keep the obligations until market conditions support the company placing the debt back with investors.
Outlook
The stable outlook for PacifiCorp incorporates our expectation that MEHC wil continue to support the utility by
contributing equity sufficient to ensure that our fully adjusted debt to total capitalization is managed over the next
few years to an adjusted level of closer to 50% and that FFO to total debt and interest coverage wil be 20% or
better and in the range of 4.0x-4.5x, respectively. Given that PacifiCorp's financial profile is weak for the current
ratings, we do not anticipate near-term upward ratings momentum for the utility, which would require the company
to sustain metrics above these levels.PacifiCorp's ring-fenced structure insulates it from some MEHC credit
deterioration, to an extent. Specifically, our criteria provides that PaciCorp's CCR can be no more than three
notches above the MEHC CCR. The company is currently comfortably within this range, and as a result we do not
see significant prospects for the utility's rating to fall as a result of adverse rating changes at MEHC, which also
enjoys a stable outlook.
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'.. '
Table 1
PacifiCorp -- Financial Summary*
Industr Sector: Integrated
--Fiscal year ended Dec, 31--
20 200 20
A-/Stable/A-1 A-/Stable/A-l A-/Stable/A-lRating history
(MiL. $)
Revenues
Net income from cont. oper.
Funds from oper. (FFO)
Capital expenditures (capex)
Cash and investments
Debt
Preferred stock
Common equity
Total capital
Adjusted ratios
EBIT interest coverage (xl
FFO interest coverage (xl
FFO/debt (%)
Discretionary cash flow/debt (%)
Net cash flow/capex (%)
DeWtotal capital (%)
Return on common equity (%)
Common dividend payout ratio (un-adj.) (%)
*Fully adjusted (including postretirement obligations)
4,498.0 4,258.0 4,154.1
458.0 439.0 307.9
1,190.1 994.8 927.6
1,757.0 1,496.4 1,375.0
59.0 228.0 59.0
6,687.3 5,945.0 5,473.6
41.0 41.0 41.3
5,987.0 5,080.0 4,426.8
12,674.3 11,025.0 9,900.4
2.8 2.8 2.5
4.0 3.5 3.8
17.8 16.7 16.9
(10.6)(10.4)(10.7)
67.6 66.3 66.1
52.8 53.9 55.3
6.8 7.8 6.2
5.2
Table 2
PacifiCorp -- Peer Comparison*
Industry Sector: Integrated
Rating as of March 31, 2009
(MiL. $)
Revenues
Net income from cont. oper.
Funds from oper. (FFO)
Capital expenditures (capex)
Cash and investments
Debt
Preferred stock
Common equity
Total capital
Adjusted ratios
--Average of past three fiscal years--
PacifiCorp Portland General Electric Co. Pacific Gas & Electric Co.
A-/Stable/A-2 BBB+/Negative/A-2 BBB+/Stable/A-2
1,669.3
101.0
310.7
402.5
31.
1,620.3
12,827.1
1,069.3
2,530.0
2,969.9
559.3
10,854.7
258.0
9,037.3
19,892.0
4,303.4
401.6
1,037.5
1,542.8
115.3
6,035.3
41.1
5,164.6
11,199.9
1,298.0
2,918.3
Standard & Poor's RatingsDirect I April 1 , 2009
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PacifiCorp
6
71330 1300572291
"
PacifiCorp
Table 2
PacifiCorp -- Peer Comparison* (cont.)
EBIT interest coverage (x)
FFO interest coverage (x)
FFO/debt ('Y)
Discretionary cash flow/debt ('Y)
Net cash flow/capex ('Y)
Debttotal capital ('Y)
Return on common equity ('Y)
Common dividend payout ratio (un-adj.) ('Y)
*Fully adjusted (including postretirement obligations)
2.7
3.8
17.2
(10.6)
66.8
53.9
7.0
2.0
2.3
3.7
19.2
(15.2)
65.1
55.5
6.2
48.5
2.8
3.5
23.3
(12.9)
67.5
54.6
11.4
48.5
Table 3
Reconciliation Of PacifiCorp Reported Amounts With Standard & Poor's Adjusted Amounts (MiL. $)*
--Fiscal year ended Dec. 31, 2008--
PacifiCorp reported amounts
Operating Operating Operating Cash flow Cash flow
income income income Interest from from Capital
Debt (before D&A)(before D&A)(afterD&A)expense operations operations expenditures
Reported 5,653.0 1,437.0 1,437.0 947.0 309.0 992.0 992.0 1,789.0
Standard & Poor's
adjustments
Operating leases 35.1 7.0 2.3 2.3 2.3 4.7 4.7 2.0
Postreti rement 379.0 20.0 20.0 20.0 50.7 50.7
benefit obligations
Accrued interest not 89.0
included in reported
debt
Capitalized interest 34.0 (34.0)(34.0)(34.0)
Power purchase 424.0 53.8 53.8 26.9 26.9 26.9 26.9
agreements
Asset reti rement 107.3 10.0 10.0 10.0 10.0 7.8 7.8
obi igations
Reclassification of 58.0
nonoperating income
(expenses)
Reclassification of 142.0
working-capital cash
flow changes
Total adjustments 1,034.3 90.8 86.1 117.2 73.2 56.1 198.1 (32.0)
Standard & Poor's
adjusted amounts
Operating Cash flow
income Interest from Funds from Capital
Debt (before D&A)EBITDA EBIT expense operations operations expenditures
Adjusted 6,687.3 1,527.8 1,523.1 1,064.2 382.2 1,048.1 1,190.1 1,757.0
*PacifiCorp reported amounts shown are taken from the company's financial statements but might include adjustments made by data providers or reclassifications made
by Standard & Poor's analysts. Please note that two reported amounts (operating income before OM and cash flow from operations) are used to derive more than one
Standard & Poor's-adjusted amount (operating income before OM and EBITDA, and cash flow from operations and funds from operations, respectively). Consequently,
the first section in some tables may feature duplicate descriptions and amounts.
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. ..,
PacifiCorp
Ratings Detail¡/,s Ot i\¡iiil Î 2009)"
PacifiCorp
Corporate Cred.it Rating
Commercial Paper
Local Currency
Preferred. Stock (1 Issue)
Senior Secured. (43 Issues)
Senior Secured (71ssues)
Senior Secured (4 Issues)
Senior Unsecured (1 Issue)
Senior Unsecured. (3 Issues)
Senior Unsecured (Z Issues)
Corporate Credit Ratings History
Z7-Mar.Z009
18-Sep-Z008
Z2-Mar-Z006
o6-Mar-Zo06
25-May-Z005
18-Aug-Z004
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.'
PacifiCorp
Ratings Detail 11\" ll fiim I 1 20091' (cont.)
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BB8+
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NStable/--
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'Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard
& Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.
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