20130920Compliance Filing.pdf

PnsnConp Peclflc Forcrl
Rocky ilorantein Forcr I
PaclflGorp Encrgy
^nr.1 orn '.!n i,r o. tl, S25NEMuhnomah,Suite1900LCT:,iii , J,..' L'J , ii ; r'' r-r'? Fortland,Oregon9Tl32
September 20,2013
VIA OVERNIGHT DELIWRY
Idaho Public Utilities Commission
472West Washington
Boise,ID 83702-5983
Attention: Ms. Jean D. Jewell
Commission Secretary
Re: Idaho Docket No. PAC-E-05-08 Compliance Filing
To the Idaho Public Utilities Commission:
PacifiCorp submits the attachment in compliance with the Commission's Order in this case
issued on February 13,2006 and amended on March 14,2006. The Order approved the
Stipulation supporting the acquisition of PacifiCorp by MidAmerican Energy Holdings
Company.
Commitment I20 of the Stipulation provides that PacifiCorp will provide to the Commission, on
an informational 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 Commitnent I20 of the Stipulation, please find the attached report
related to PacifiCorp.
Very truly yours,
(\"*td-s!.*
Bruce Williams
Vice President and Treasurer
Enclosure
Fitch Ratings I Press Release Page I of4
FitchRatings
Fitch Affirmg tlEHC's & Subcidiarie Ratlngs; Outlook Stable; NNG Outlook
Revlged to Stable Retngs Entlomernent Policy
16 Sep 2013 202 PM (EDT)
Fitfi Raiings-NEw Yod<-1G S€pbmber2013: Fitch Ratings hm affimed MidArnerican Energy Holdings Co.'s (MEHC)
Longterm lssuer Oafeult Rating (lDR) et'BBB+'and lts Short-brm ratng at'F2'. MEHCI indiviJual security ratingn haro
also bcen affmed. Cmcunanty Fitcfi has affrmed the lDRs ard individual secudty ratings br MidAmerican Funding LLC
(MF), MilAmeftxn Energy Co. (MEC), PadfiCorp (PPll/), and Kem River Funding Corp. (KRF).
Fitsh has wiurdrawn lhE MEC Prehned Sbck rating as there is no amoJnt outshncfirE. The RalirB Oudooks rsmaln
Stauo.
Fitcfr has abo affirmed Norfiem Natural Gas Co,'s (NtlG) Lmg-term IDR and individual security ratings, end revbed the
Ouflook b Stable fom Negatirn.
A complete list of all rating actions bllows at the end of this rclease.
KEY RANNG DRIVERS
-Berkshire Hathaway, lno. o ,n€rship BtrBngthons group fundlng capabiltiee and c+ital reEntion.
-Ring-bncing by spccia purposa entitios prcscn,gs opcrating ompany crcdit quality.
-Diwrsified lorr-riC( rcgulated brcinesses support stable cash llors.
-€onsolidabd leverage remains hagh.
-Suffcbnt lhuidity relative to funding needs,
MEHC Affrmati6n: MEHC's rating and Stable Oudook era Bupporbd by a large higfiuality assct bese, including two
inEgrabd regulaEd utlitiee, and two U.S. inbrstste gas pipeline sptsnts. The ratings also conskler Berkshire Hattraway,
lnc.'s (BRK IDR 'AA-ri Steble Ou0ook by Fitch) 90% orrpr$F of the companywhidr Fitctr vi€rvs as being benefidalto
MEHC's uadit quality. The company rebins capital aB a dir€ct result of BRKc financtal strengtr, whicfi obuabs fie n€€d
to upsfreem dividonG and aftorde MEHC an adt antage h fun<ling oqanic groflfi and acquisitbns srch es PPW in 20OG
and he pendir€ ecquisition of NV Eneryy. lnc. (lDR'BB+'; Cmditt\Jilch Po6iti'/c).
Corpolidabd Flnarrcial Metrica: Relatw to hbtorlcal p€rbrmanoe frrancial mctics are improving, EBITDA-to-inter€sl as
calqiated by Fitch, was 3.5x fur th€ labst t$rslw month (LTM) p6dod ended June 30, 2013, and brecast by Fitch to reach
4x owr the firre-year bncast period. Cash f,ows are likely to \'veaken as the poaitiro bencfib fmrn bonus depreciation,
produciion tax credib (PTCs)and int€etnent to( credits (lTCs)are loner in the forpcaet pedod. Furds fiorn Opeations
(FFO) inbrest oov€rag€ lbr the LTM period ended June 30, 2013 was 4.6x and is forocast by Fitcfr to b€ et, or below 4x
toward fte end of the fwe-year brecast perlod.
Fitctt's brscast agsumes the pending aoquisition by MEHC of NV Energy is compleb in ZJ14 at ri,hich time the proportion
of consolilated eamings contih.rbd by regulabd dlity hlsinees willbe approximably 70%; and, higherthan 90%
induding the pipeline busin6s€8.
High Lewrage: Debt-to-EBITDA br thc LTM pcriod cnded June 30, 2013 was 5.3r. The anthipated impac{ of the 05.6
billion acquisltion of NV Energy couH keq leverage metrics elevared through 2015. Fitdr considers any acqulsiton
financing provkled by BRK to be'equity likd. Absent he NV Energy acquislton, Fitch forecaet debt-to-EBITDA to range
naer 4.4x toward the end of the fiw-year 6t€cast.
Suffcicni Liquidity: MEHC's consolidabd lQuirJig pocition at June 30, 2013 was $5.'16 billion, including $892 million in
availablr cash. Thas fgurc includes a $2,000 million equity commitnent agreement (ECA) prolded by BRK to MEHC
through February Z)14. MEHC stan&.alone bank credit is $600 million, and the credit facility matJrss in 2O'17 . Bank credit
supports the compeny'a commercial paper (CP) prognm. Single bank concenbation is not a conogm as the laryeet single
http://www.fitchratings.com/creditdesldpress_releaseVdetail.cfm?prinFl &pr_id=802170 9ll612013
Firch Ratings I Prcss Release Page 2 of4
bank conentration is 8%.
Fibh consilers MEHC and subskJiaries' access b fi€ bank crdit and dsbt capital mslotr unrasEicilrd. MF/UEC stan&
alonc scdit indudes a $600 million bark cr€dll hctlity s'iidr matute in 2018. PPW dan&alore credit is $1.2 billion wih
fadllty maturita n2O17 and 2018.
MFniEC RatrBs Afrrned: The ra&Eg affirmations ara based on the cndlt quallty of MEC, an inEgretad regulatsd elecfric
rdllty. MF b an inbrmedhE holdim cffiipeny owned by MEHC, and indirBct holdlng company of the utility. MEC's rating
End Statrle Outlcok rsllect3 the oompanfg rBlatiE low hriness dsk profile, solid finencial mctics, and a consfructive
ragdatory environm€nt in !owa.
Fihh epecB financial metics to lBmain corBisbnt relative b guidellnes br he dak profile and ratings, wift MF EBITDA-
tointerest and FFO-todebt to rangs batrvcen 4.5 - 5.4( and appmxlnately 21%, rgcpectively hrough 2017. The same
mcticl fur MEC are forecest to range b€ttilsion 5. 1x - 5.7x and loree to 23%. reopectiroly owr thg five-year forecast
p€riod, Fltch attrlbut€s cufiBnt hlgher levels ol FFO to bonus depreciation and PTCg fur wind lpneration.
MEC hag a new rab lilng pcnding wih the lowa Utilitbs Boad (lUB), with inbrim raEs in sfrct in August 2013 and neu,
rates efrdivE ln 2014. The utility hae propo8€d an eneEy adjustnent dauso to captuns changB in ratail fuelcoets,
environmental onsurnaUee and aXowaneg, ard pretax cfianges ln PTCs. The utillty also indudcd in its liling a
fansmigion rkler b r€oowr M6contnent lndependent Syetem Operator (MlsOlnilbd cosG. Fitch's assumes a fair
outcome.
PadfCotp Ratinge Affirme<l: The utility'e rating and Stible Outook rsfrects PPVUg lot , busin$s risk profile, competitiro
r*ouroe bace, golirl llnancial meUics, and a fairly balanod and diwrsifi€d r€gul8bry environmont PPI/Voperabs in slx
stab jurMictions, t tah, tAlyoming, ldaho, Ongon, Washington and Califomia. Ratingo Etabfity is prsdiceffi on
Bason$lo outcornc in pending and lirture rab ptocaodangs to racover anticipabd, signmcant capibl inwstrnenE.
A l(ey rating concem is the ex€cutm of a laqe csibl plan and timoly r€covBry of ]llabd coctB. Also a conocm is frrepobntel br monr stsingent erwirmmental rules and regulationc. Orcrthe neld fi!€ years capltal spendirp will rgadr t6
billion, S2 billion less thm Fibh's prwious ssasmenE, largdy due to a scsb bed( by management to relled lowerb(!et load grouffr. The Fvis€d plan refiects delaya rtailirB caftaln gBneratlon and fansmilsion prciects end supporB a
sEDL crldit pofile. Hlgher spendng lolels could opose th€ utility to inqaaead regulabry recovury which may rveaken
fmanciel mctrics o\rer a capitel inbnt*w pqiod.
Rab taatnent ia fair and uolldirenified acroos multiple stab jurisdictiona. Exposure b commodity price fak is largplymitged by porer ediucmcnt mscfianisms in fiw of the six rate desQna Other rab bafirras alls, br the rsco\rsy or
d3trnal br future racolGry of invs8tnenE in rerrwable generdon, or othcr inv€stmentB outBftle traditionel rab filin$.
PPW has reb filingr pcnding in Oregon and l,t,hehington. Fitch's nting aaaessment aEEume fair outcomcs in eacfi.
NNG Ou{ook Revis€d to Stable: The Outlmk revision refeca Fitch's aacumpton thatth€ $100 million maturity drc in
2015 will be paldJn tullcfrdivdy reducinS pro-forma hvorags metice. Fitch lbrecasb debt-to-EBITDA at or near 2.5x for
a sustainSle period starting in 2015. Fitch also consk ers r3-contractiru will be supportiw of a Stablc OIlook.
Abssnt m-peyrnent in full of the matufity andlor a narrowlrg ol basls difbnntiab, whicfr would harre a negatirre impad on
intcrupttUe transportatlon plioes, Fitch could exped to see levsrage metrics at lerreb higher than 2.8x wtriolr ould rcsult
in ncgotir,B rating action.
The Stable Ouflook br NNG lefrects the pipeline's strorp busln€ss profile as an essontial supplier of natural gas to many
Midrir6t utilitieg under bng-brm colrfaots, farorable operating cfiaracierBtica, and lm l€gufietory rlsk.
I(RF Ratinga Afimsd: KRF ralingo reiect Fitch's easegsment ttrat tle dpeline producrc predi@ble caeh lloue, r€csirresHr rab beetncnt by the FERC, and capital spendiry levels rcmain manageable. Fibh vlils d€Dt amortization as a key
ddver of improMrp la,crage rnetrics os the tiver€er bremt pefod. The pipdine terv€g th€ Salt Lake City, UT areas,
Souttprn Ne\rada and Ccnhal Cd[bmia.
RATING SENSITMTIES
Futuo dcwbpments ihat may, individually orcolectively, lsad b a pooilive ratirp action indude:
-MEHC: High lewrage at th6 consolidabd level continues to limit positivc rating rtion;
htp://wunv.fitchratings.com/creditdesUpr€ss_releases/detail.cfm?print=l&pr_id:802170 9ll6t20l3
Firch Ratings I Press Release Page 3 of4
-MF: lf MF yvsro to fldccfii its parsnt levEl debt ils long-tom lDR would likely be raisod to that of MEC:
-MEC: The alnady sfong retirp of the utili$ limiE poeitive rating ac'tion at thls time;
-PPtlf lf FFo-to{ebt ry€r€ to ancr€a8e and bo sustained at or n€ar 20%;
{,lNG and KRF: The alrcady sfrong ralings limit positive ratirB action at this time.
Ffirr€ de\€lopfiients thet may, indMdually orcollectiroly, leed b a negatiw raling adim indude:
-MEHC: A cfiange in owneahip upuld haw nogntirc implications on the comperVs credit ratirEsl and/or a mabrial
cfiange in finarrcial poli*rs induding dividends fiom MEHC b BRK would prEssue financial metrbs:
-MF and MEC: lf FFGIo{obt u€rB b deorsaso and be susteinsd bslcni, 20%.
-PPytt lf FFO-to{ebt vuele b decrcre and be srctainod belour 18%;
jtt)tQ: l,tlener pro-brma lewrrye that ould Egult in wsakened levsragp m&il:g over a longer padod than consklerad byFitcfi in its raffnS fuecast ootld rcsult ln nogatvg rating action:
-KRF: Negativu rating acllon is unliksly al this time.
Flbft hag afirmed thc fullowing ratiryc wih a Stable Outook:
MMmsican Encrgry HoldirUp Co. (MEHC)
-tongFbrm IDR at'BBB+';
-Senior unsecured d6bt st'BBB+';
-Preft nsd stock at'BBB.';
-Short-brm IOR at'F2'.
MllAmedcm Fundtp u-C (UF)
-Longerm IOR at'BBB+';
-Senlor seored d€bt at'A"'.
MidAmerican Energy Company (MEC)
-Lmgrbrm IDR at'Ar';
-Senior seored debt at A+:
-Scnior unsectrrsd d€bt et'A:
-Short-brm IDR at'F1':
-€ommercbl paper at'F1'.
Fibh hac wihdrawn the Pmftned Sbdt ratng at'BBB+'.
PeciftColp (PPVU
-Loryrbrm IDR at'BBB;
-Senlor secu€d dobt at Ar;
-Senkrr rmacur€d dcbt at'BBB+':
-Prgbrad stod( at'BB&';
-Short-term IDR at'F2';
-€oomerdal paper at'F2'.
Kem Riwr Fundlng Corp. (KRF)
-Longbrm lDR d'AJ;
-Scnior unaeqrr€d d€ff ai 'A-'.
Fitsh has afrrmcd the tullovlng ratingt ard nvircd the Ouflook b Steble tom Ncgativc:
l,lorthem Nsturel Gas Co. (NNG)
-LongFbrm IDR at'A;
http://www.fitchratings.com/crpditdesUpr€ss_r€leascVdetail.cfm?prinFl&pr_id=802170 gfi6ng6
Fitch Ratings I Prcss Rclease Page 4 of4
-Senlor unsecurcd d€bt at A.
Contect
Prinary Anatyst
Lindsay Minr€man
Dioctor
Fidr Ratinge,lnc.
One Stab Plaza
NewYofi, t{Y 1m04
[phone]
Secondary Analyst
PhilSmyth, CFA
Ssnior Ditudor
+1-212-90&0531
Commitbe Cluirpason
Glen Grabelsly
Managiq Dilector
+1-212-9{Jfl.0/5t7
lledia Relations: Brian B6rtBcfi, New York, Te[ [phone][9, Email: [e-mail].
Additional inltrmation is arailable at \ruw.fibhratngs.com'.
Applic$le Cdbria and Rclated Research:
-Corporae Radng Mefiottologff (Aug. 8,2O12);
-'Ratng t{orb AmctEan t tilfties, Gas arld l/\ffir Companies'
(May 16,2011);
-'Reovery Raffigp and Notching Cdbria br Utlitiee (ilov. 13,2012);
-'Corporft Ra0rB Meffiodology: lndudirB Shorlbm Ratirpc ard Par€ntend Subeidiary Linkage (Aug. 5.2013).
AppllcebbGrlbde md tuhlod Rocerch:
Corporab Ratlng Mcthodology - Ellectivc from I August 2012 - 5 August 2013
Rating North Amedcan Utilites, Porwr, Ges, and ffibr Conpanies
Reovery Refir€3 and Ndchirp Cribria br tftlities
Corporab Rathg lUlehodology: lndudirg Shott-Tern Railngs and Parcntand Subsklhry Unkage
Addltlonel Dhcloluro
Soli:itetion Stehrc
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THESE UMITATIONS AND DISCTAIMERS BY FOLLO/',ING THIS LINK
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TERMS OF USE OF SUCH RATINGS ARE AVAIUBLE ON THE AGENCYS PUBUC WEBSITE
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FOR WHICH THE LEAD AMLYST lS BAISED IN Atl EUREGISTERED ENnTY CAN BE FOUND ON THE ENTITY
SI,,TIMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
Coplrright O 2013 by Fltdr Rrtinp, |rc., Fltch Rdingr Ud. and llr subcilierict.
http:i/www.fitchratings.com/crcditdesuprcss-releases/daail.cfrn?prinF I &pr_id=802 I 70 9ll6l20t3