20161115Compliance Filing.pdf

~ PACIFl[ORP
November 15, 2016
VL4 OVERNIGHT DELIVERY
Idaho Public Utilities Commission
4 72 West Washington
Boise, ID 83702-5983
Attention: Ms. Jean D. Jewell
Commission Secretary
FECE IVED
Pacific Power I
Rocky Mountain Power
825 NE Multnomah, Suite 2000
"' ·· ' c r]" I 5 fl M Portland, Oregon 97232 ,.ior ... .c Hn9:L,2
Re: Idaho Docket No. PAC-E-05-08 Compliance Filing
To the Idaho Public Utilities Commission:
PacifiCorp submits the attachments 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.1
Commitment 120 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 Commitment 120 of the Stipulation, please find the attached
reports related to PacifiCorp.
Very truly yours,
~w~
Bruce Williams
Vice President and Treasurer
Enclosures
1 On April 30, 2014, MidAmerican Energy Holdings Company changed its name to Berkshire Hathaway Energy
Company.
FitchRatings
Berkshire Hathaway Energy Company
Subsidiary of Berkshire Hathaway Inc.
Full Rating Report
Ratings
Long-Term IDR
Short-Term IDR
Senior Unsecured
BBB+
F2
BBB+
IDR -Issuer Default Rating.
Rating Outlook
Stable
Financial Summary
Berkshire Hathaway Energy Company
LTM
($ Mil.) 6/30/16 2015
Adjusted Revenue 17,373 17,880
Operating EBITDAR 6,864 6,917
Cash Flow from
Operations 6,218 6,980
Total Adjusted Debt 38,658 38,762
Total Capitalization 60,877 60,009
Capex/
Depreciation (%) 213.7 242.0
FFO Fixed-
Charge Coverage (x) 3.9 4.1
FFO-Adjusted
Leverage (x) 4.9 4.6
Total Adjusted
Debt/EBITDAR (x) 5.6 5.6
Related Research
U.S. Transmission and Distribution
Utilities Handbook (A Detailed Review
of Electric and Gas T&D Utilities -
Second Edition) (May 2016)
Analysts
Philip Smyth, CFA
[phone]
[e-mail]
Kevin Beicke
[phone]
[e-mail]
www.fitchratings.com
Key Rating Drivers
BRK Affiliation: Berkshire Hathaway Energy Company's (BHE) ratings consider the favorable
impact of affiliation with Berkshire Hathaway Inc. (BRK; AA-/Stable). As a result, BHE is able
to retain capital typically paid out in dividends by publicly held investor-owned utilities (IOUs).
This dynamic is a function of BRK's strong credit profile, large cash position ($73 billion as of
June 30, 2016) and investment appetite. Other benefits include BRK's ability to use tax shields
and fund strategic growth opportunities.
Diversified Asset Base: BHE's ratings are supported by its large, high-quality portfolio of
utility and utility-like assets primarily located in the U.S., Canada and the U.K. BHE owns three
large integrated electric utilities with generally constructive regulatory compacts and average to
moderately above industry average growth trends, operating in the U.S. Rocky Mountain/
Pacific Northwest, Midwest and Desert Southwest regions. The highly politicized Nevada solar
energy debate injects a measure of uncertainty into the state's political/regulatory environment.
Mergers and Acquisitions: BHE has been an active consolidator in the utilities, power and
gas (UPG) sector, acquiring high-quality, low-risk electric and gas utility, electric transmission
and natural gas pipeline assets. Major acquisitions in recent years include Altalink, L.P. (ALP)
and NV Energy, Inc. (NVE; BBB-/Stable) in 2014 and 2013, respectively. The impact of M&A
on BHE's credit will be driven by price, asset quality and funding choices. Debt-funded
transactions and/or acquisition of higher-risk businesses could challenge future credit quality.
Manageable Leverage: Consolidated BHE leverage is relatively high. However, Fitch Ratings
projects future cash flows from BHE's diverse portfolio of businesses to amply cover estimated
parent-only obligations. BHE's parent-level debt increased sharply, reflecting the close of two
major utility acquisitions in 2013 and 2014. Long-term debt at BHE topped out at $38.6 billion in
2014 before declining to $36.9 billion as of June 30, 2016. Fitch expects significant debt
reduction will continue through 2020, absent further M&A activity.
Rating Outlook: The Stable Outlook considers BHE's relatively high consolidated leverage,
strong cash flows and cash retention, funding and tax advantages associated with BRK
affiliation. The Stable Outlook also reflects BHE's portfolio of high-quality utility and utility-like
businesses.
Rating Sensitivities
Positive Rating Action: High consolidated leverage limits positive rating actions in the near to
intermediate term. Improvement in FFO-adjusted leverage to 4.0x or better on a sustained
basis could result in future credit rating upgrades at BHE.
Negative Rating Action: Deterioration of BHE's FFO-adjusted leverage to 5.0x-5.5x or worse
on a consistent basis would likely lead to future credit downgrades. Longer term, a change in
ownership structure and/or strategic direction at BRK that eliminates or diminishes capital
retention and other benefits available to BHE from its affiliation with BRK would likely lead to
downgrades at BHE.
October 27, 2016
FitchRatings
Related Criteria
Criteria for Rating Non-Financial
Corporates (September 2016)
Parent and Subsidiary Rating
Linkage (Fitch's Approach to Rating
Entities within a Corporate Group
Structure) (August 2016)
Recovery Ratings and Notching
Criteria for Utilities (March 2016)
Rating U.S. Utilities, Power and Gas
Companies (Sector Credit Factors)
(March 2014)
Berkshire Hathaway Energy Company
October 27, 2016
Financial Overview
Liquidity and Debt Structure
BHE's liquidity is strong, with total available consolidated liquidity of $5.2 billion as of
June 30, 2016. Liquidity consists of BHE's $778 million in consolidated cash and $4.4 billion of
unused borrowing capacity under its $6.3 billion of committed revolving credit facilities. BHE
has a $2 billion parent-only credit facility that matures in June 2019 and supports its CP
program. Debt maturities are manageable, averaging $2.2 billion in 2016-2019.
Debt Maturities and Liquidity
($ Mil., As of June 30, 2016)
2016
2017
2018
2019
2020
Thereafter
Cash and Cash Equivalents
Undrawn Committed Facilities
Source: Company data, Bloomberg, Fitch.
Cash Flow Analysis
268
899
3,619
4,075
2,012
27,674
778
5,203
Total Debt and Leverage
-Total Adjusted Debt (LHS)
($ Mil.)
50,000
40,000
30,000
20,000
10,000
-Debt/EBITDAR (RHS)
0 2012 2013 2014 2015 LTM
6/30/16
Source: Company data, Fitch.
(x)
8.0
6.0
4.0
2.0
0.0
BHE's FCF was $864 million in the L TM ended June 30, 2016, as indicated in the Peer Group
Analysis table on the page 3. Notwithstanding significant asset acquisitions, including NVE and
ALP, and significant capital investment, BHE was FCF positive in 2012-2015. Over that period,
BHE averaged approximately $200 million in FCF annually. Fitch estimates that BHE will
generate more than $1 .8 billion in average annual FCF during 2016-2020. Fitch estimates that
FFO-adjusted debt will range from 4.6x-4.8x during 2016-2020.
CFO and Cash Use
•CFO
($ Mil.)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2012
Source: Company data, Fitch.
2013
•Capex •Dividends
2014 2015 LTM 6/30/16
2
FitchRatings
Peer Group
Issuer Country
A-
Southern Company U.S.
NextEra Energy, Inc. u.s
BBB+
Duke Energy Corporation U.S.
Issuer Rating History
LTIDR Outlook/
Date (FC) Watch
May 5, 2016 BBB+ Stable
Nov.24,2015 BBB+ Stable
April 24, 2015 BBB+ Stable
Dec. 1, 2014 BBB+ Stable
Oct. 3, 2014 BBB+ RWN
May 6, 2014 BBB+ RWN
April 7, 2014 BBB+ Stable
Sept. 16, 2013 BBB+ Stable
May 30, 2013 BBB+ Stable
Sept. 17, 2012 BBB+ Stable
Sept. 29, 2011 BBB+ Stable
Oct. 1, 2010 BBB+ Stable
Oct. 2, 2009 BBB+ Stable
Sept. 18, 2008 BBB+ Stable
Aug. 13,2008 BBB+ Stable
July 13, 2007 BBB+ Stable
March 9, 2006 BBB+ Stable
Dec.6.2005 BBB Stable
May 24, 2005 BBB Stable
Feb. 10,2004 BBB Stable
Nov.27, 2002 BBB Stable
Sept. 26, 2002 BBB Stable
March 7, 2002 BBB Stable
Jan. 31 ,2002 BBB Stable
May 9, 2000 BBB Stable
March 11, 1999 BBB-
Feb. 10, 1998 BB+
Oct. 8, 1997 BBB-
March 14, 1994 BB-
LT IDR -Long-term Issuer Default Rating.
FC -Foreign currency. RWN -Rating
Watch Negative.
Source: Fitch.
Berkshire Hathaway Energy Company
October 27, 2016
Peer and Sector Analysis
Peer Group Analysis
Berkshire
Hathaway Southern NextEra Duke Energy
($ Mil.) Energy Company Company Energy, Inc. Corporation
As of 6/30/16 6/30/16 6/30/16 6/30116
IDR BBB+ A-A-BBB+
Outiook Rating OuUook Rating OuUook Rating Outiook Rating OuUook
Stable Stable Stable Negative
Fundamental Ratios (x)
Operating EBITDAR/
(Gross Interest Expense+ Rents) 3.3 6.2 4.1 4.4
FFO Fixed-Charge Coverage 3.9 6.0 4.3 3.8
Total Adjusted Debt/Operating EBITDAR 5.6 5.8 4.0 4.6
FFO/Total Adjusted Debt(%) 20.5 17.6 26.2 18.7
FFO-Adjusted Leverage 4.9 5.7 3.8 5.4
Common Dividend Payout(%) 84.7 58.7 65.7
Internal Cash/Capex (%) 116.1 65.8 45.8 63.5
Capex/Depreciation (%) 213.7 257.5 384.4 200.1
Return on Equity(%) 10.5 10.9 11.5 6.6
Financial Information
Revenue 17,373 17,393 16,588 23,017
Revenue Growth(%) (1.5) (2.7) (6.3) 0.0
EBITDA 6,703 6,866 7,532 9,242
Operating EBITDA Margin(%) 38.6 39.5 45.4 40.2
FCF 864 (2,225) (5,765) (2,700)
Total Adjusted Debt with Equity Credit 38,658 40,280 30,321 44,310
Readily Available Cash 778 1,897 730 676
Funds Flow from Operations 5,880 5,939 6,228 6,107
Capex (5,354) (6,514) (10,636) (7,398)
IDR -Issuer Default Rating.
Source: Company data, Fitch.
Key Rating Issues
Ownership
BHE is 90% owned by BRK. Ownership of BHE by BRK affords the former with the ability to
retain capital typically paid out in the form of dividends by publicly held IOUs. This dynamic is a
function of BRK's strong credit profile, large cash position ($73 billion as of June 30, 2016) and
investment appetite.
The higher relative cash flows and liquidity, all else equal, compared with the typical IOU,
provides a distinct competitive advantage, in Fitch's opinion. Other benefits include BRK's
ability to use tax benefits and willingness to provide competitive funding to support BHE's
strategic growth initiatives, including M&A.
Diverse Asset Base
BHE's ratings are supported by its large, high-quality portfolio of utility and utility-like assets
primarily located in the U.S., Canada and the U.K. Consolidated BHE leverage is relatively high.
However, Fitch projects future cash flows from BHE's diverse portfolio of businesses to amply
cover its estimated parent-only obligations. Fitch calculates BHE's U.S. utility operations
represented 61% of consolidated 2015 EBITDAR, with global utility and utility-like businesses
accounting for 89%. The remainder of 2015 EBITDA was provided by BHE's renewables
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FitchRatings
Berkshire Hathaway Energy Company
October 27, 2016
business, which invests in projects that have negotiated long-term contracts with creditworthy
counterparties in place, and its relatively small real-estate brokerage business.
PacifiCorp
PacifiCorp (PPW, A-/Stable), with its six-state Pacific Northwest/Rocky Mountain region
service territory, is the largest of BHE's three U.S. integrated utility operations. PPW accounted
for 30% of BHE's consolidated 2015 EBITDA. By comparison, BHE subsidiaries NVE and
MidAmerican Funding accounted for 18% and 13% of consolidated 2015 EBITDA, respectively.
Regulation across PPW's service territory is generally balanced, with the exception of
Washington, which has been somewhat challenging and represents a relatively small slice of
jurisdictional revenue. PPW's Washington operations represented approximately 8% of
consolidated 2015 kWh sales. By comparison, Utah, Oregon and Wyoming represent 44%,
24% and 17% of kWh sales, respectively. Fitch believes that PPW's most recent Washington
jurisdictional general rate case (GRC) was more constructive from a credit perspective than
two previous GRC decisions. In September 2016, the Washington Utilities and Transportation
Commission approved a two-phase rate increase totaling $13.7 million based on a 9.5%
authorized ROE.
Regulatory outcomes across the remainder of PPW's service territory have been and are
expected to continue to be balanced. Various riders are in place to facilitate recovery of certain
costs outside of GRCs, including fuel-adjustment clauses that mitigate commodity price
exposure in all of PPW's regulatory jurisdictions.
PPW's capex in 2015 declined 14% to $916 million from $1 .07 billion in 2014 and was 32%
below 2012 capex of $1 .3 billion. By comparison, PPW capex averaged $1 .5 billion per year in
2010-2012, while projected 2016-2018 capex approximates $807 million per year on average.
Lower capex levels at PPW in recent years reflect completion of large projects, including major
transmission and renewables investments. In addition, capex incorporates slower PPW service
territory load growth and efforts by management to minimize customer rate increases. Efforts
by management to minimize customer rate increases while maintaining system reliability,
safety and customer service have resulted in generally flat O&M expense.
Slowing PPW service territory load growth trends are driven primarily, in Fitch's view, by energy
efficiency gains and are a source of some uncertainty, along with the impact of environmental
rules and regulations on PPW's coal-fired generation. Fitch believes these dynamics are
manageable within the regulatory compact and unlikely to meaningfully weaken PPW's
creditworthiness in the near to intermediate term.
Conversely, legislation enacted this year in Oregon and Utah is credit supportive, in Fitch's
opinion. Oregon Senate Bill (S.B.) 1547-B, phasing out coal-fired generation by 2035 while
sharply increasing Oregon's renewable standard, was signed into law March 2016 by Gov.
Kate Brown. The law sets firm milestones for the elimination of coal generation for the state's
two largest electric utilities, Portland General by 2035 and Pacific Power (which is a division of
PPW), by 2030. S.B. 1547-B also sets a significantly higher renewable portfolio standard (RPS),
requiring that 35% of retail load is sourced from qualifying renewables by 2030, 45% in 2035
and 50% by 2040.
Oregon's 2007 RPS required that 25% of retail customer power needs be met by qualifying
renewables by 2025. S.B. 1547-B is the result of a collaborative process of stakeholders,
including PPW and environmental groups, and will help the state achieve its ambitious carbon
reduction goal of 75% below 1990 levels by 2050. PPW estimates that the legislation will save
consumers up to $600 million compared with a ballot initiative sponsored by Renew Oregon
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FitchRatings
Berkshire Hathaway Energy Company
October 27, 2016
that was withdrawn as part of the settlement. Fitch expects the legislation will bring pressure
PPW cost structure. Costs related to the legislation are expected to be recoverable in rates.
In Utah, Gov. Gary Herbert signed Utah Senate Bill 115 on March 30, 2016. Enactment of
S.B. 115 is a constructive development that includes, among other things, authorization of
recovery of 100% of net power costs outside of GRC proceedings. The law also requires the
Utah Public Service Commission to establish a fund through a change in accounting for
energy-efficiency programs as a reserve for coal plant exposure. In addition, S. B. 115
establishes and funds a pilot for investment in electric vehicle infrastructure and clean coal
research.
MFIMEC
MidAmerican Funding LLC (MF; BBB+/Stable) is an intermediate holding company that owns
all of MidAmerican Energy Company's (MEC; A-/Stable) equity and accounted for
approximately 13% of BHE's proforma 2015 EBITDA. MEC is headquartered in Des Moines,
IA, and operates in four Midwestern states. The utility's Iowa service territory accounts for the
vast majority of MEC and MF's consolidated earnings and cash flows. The regulatory regime in
Iowa is balanced from a credit point of view.
In MEC's last GRC, the Iowa Utilities Board (IUB) authorized a stipulation that increased MEC's
base rates by $266 million, representing 100% of MEC's request. The rate order included
revenue sharing based on specific ROE hurdles and authorized energy and transmission cost
adjustment mechanisms. Separately, the IUB, in an August 2016 order approving ratemaking
principles for the planned construction of MEC's 2,000-MW Wind XI project, modified MEC's
sharing mechanism. The modified mechanism would recalculate the sharing trigger annually
using a weighted average of all rate-making principle equity returns and all other rate base. All
other rate base, including Wind XI, would be calculated based on the 30-year single-A utility
bond yield plus 400 basis points with a minimum 9.5% ROE sharing trigger. The current
threshold would be 10.7%.
If approved by the IUB, MEC would use 100% of net income in excess of the weighted average
ROE sharing trigger to reduce coal and nuclear rate base, in effect, reducing future rates to
customers. Currently, the revenue sharing mechanism trigger is an 11 % ROE with 80% of
MEC net income over the 11% ROE used to reduce rate base and 20% retained by the
company up to a 14% ROE. Over 14%, all earnings are used to reduce rate base.
MEC has significantly diversified its fuel mix in recent years via meaningful new-build wind
generation while maintaining rates that are competitive regionally and compared with the
national average. With anticipated completion of Wind XI in 2019, MEC's wind generating
capacity will increase to more than 6,000 MW from 3,448 MW at year-end 2015. Nonetheless,
compliance with EPA's Clean Power Plan's carbon-reduction targets is a source of some
uncertainty.
NV Energy
NVE's operating subsidiaries, Nevada Power Company (NPC; BBB/Stable) and Sierra Pacific
Power Company (SPPC; BBB/Stable), provide utility service to the greater Las Vegas area,
Reno and northern Nevada. NVE accounted for 18% of BHE's 2015 EBITDA. In Fitch's view,
recent developments in Nevada, including New Energy Industry Task Force (NETF)
recommendations to Gov. Brian Sandoval, turnover at the commission and a highly politicized
debate regarding net energy metering (NEM) inject a level of uncertainty into the state's
regulatory compact. Fitch believes regulation in Nevada has been and is likely to continue to
remain credit supportive.
5
FitchRatings
Berkshire Hathaway Energy Company
October 27, 2016
Under Nevada regulation, GRC filings are required at least every three years. The Public
Utilities Commission of Nevada (PUCN) is required to issue a final decision within seven
months of the filing date. Nevada regulation allows inclusion of known and measurable
adjustments to the test year; preapproval of capex; and mechanisms for the timely recovery of
fuel and purchase power, energy efficiency and conservation program costs. Twenty-year
integrated resource plans are filed every three years and are subject to PUCN review with
regard to ultimate inclusion in base rates.
SPPC filed its electric and gas GRC in June 2016 and Fitch expects NPC to file its next GRC in
2017, consistent with the mandatory three-year cycle for base electric rate case filings in effect
in Nevada. NVE management is focussed on minimizing cost inflation and providing stable
customer rates. In its filing , SPPC is seeking no change in electric rates, but indicates a
$21 million revenue deficiency. SPPC also filed a natural gas GRC seeking an $8,000 revenue
reduction. The electric and gas filings are based on a calendar 2015 test years updated for
known and measurable changes through May 31, 2016. The PUCN staff filed testimony in the
proceeding supporting a $4.9 million electric rate increase and a $4.4 million gas rate
reduction.
In addition, the Office of Attorney General Bureau of Consumer Protection filed testimony in the
GRC supporting a $12.7 million electric rate reduction and a $6.7 million gas rate reduction. A
final PUCN decision is expected by year end with rates effective Jan. 1, 2017.
On Oct. 18, 2016, SPPC filed a stipulation with the PUCN that includes the regulatory
operations staff of the PUCN and the bureau of consumer protection, among other signatories.
The stipulation supports electric and gas tariff decreases of $2.9 million and $2.4 million,
respectively, through existing rate design based on sales and lower volumetric rates. The
settlement does not address non-grandfathered NEM rate design or optional time-of-use rate
schedules for certain customer classes. Authorized returns on equity for SPPC's electric and
gas operations as proposed by the stipulation are 9.6% and 9.5%, respectively. The PUCN is
not bound by the agreement and the parties to the stipulation request that new rates become
effective Jan. 1, 2017.
In SPPC's 2013 GRC, the PUCN issued a final order in December 2014. SPPC filed the GRC
in June 2013, supporting a $2.5 million net rate decrease composed of an $8.4 million electric
rate reduction and a $5.9 million gas rate increase. The final PUCN order granted a
$35.2 million net rate decrease, consisting of a $39.1 million electric rate reduction and a
$3.9 million gas rate increase.
In its last rate case, NPC reached a settlement agreement that was approved by the PUCN
with modification, resulting in no change to base rates. In addition, the settlement included
several rate design adjustments that are modestly constructive from a credit perspective. The
authorized ROE included in the settlement was somewhat below the industry average at that
time. The rate case was initiated by NPC in May 2014 and the commission order approving the
settlement agreement issued October 2014.
Customer choice for large commercial and industrial customers has been in effect since 2002,
following enactment of enabling legislation. In 2015, the PUCN approved requests by two
casinos to procure their energy supply from alternative providers contingent upon the casinos
paying exit fees totalling approximately $103 million. Two large casinos, MGM Resorts
International and Wynn, served notice to the PUCN and began procuring energy and ancillary
services from an alternative supplier in October 2016.
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FitchRatings
Berkshire Hathaway Energy Company
October 27, 2016
Net Metering Update
In December 2015, the PUCN issued an order that established separate rate classes for
customers with installed distributed renewable generation resources. The PUCN order also
established new rates for NEM customers. The new rates include a higher basic service charge
to better reflect fixed utility service costs and a lower volumetric rate. The changes in rates are
revenue neutral to the utility and, combined with the cordoning off of NEM customers as a
separate class, are expected to effectively mitigate cross-subsidization issues.
In addition, the commission order reduced the credit for customer exports to NVE from the full
retail rate to the actual value of excess generation based on the utility's avoided cost, phasing
in the lower NEM customer credits over 12 years. S.B. 374 enacted in June 2015 directed the
PUCN to review net metering rates and identify and eliminate unreasonable shifts in costs from
net metering customers to non-net metering customers by year-end 2015. The commission's
order regarding NEM was controversial , especially in light of the fact that existing distributed
solar installations were not protected.
The political backlash to the commission action has been strong. In September, Gov. Sandoval
did not reappoint Chairman David Noble, opting instead to appoint Joe Reynolds, former
general counsel for the Sandoval administration, as chairman of the PUCN. Sandoval also
appointed Leo Drozdoff as acting commissioner. The appointments replace departing PUCN
Chairman Noble and Commissioner Alaina Burtenshaw. Also in September, the PUCN voted to
approve a net metering tariff that grandfathers existing distributed systems for a
20-year period. In addition, the New Energy Industry Task Force submitted recommendations
to address long-term energy issues in Nevada to Gov. Sandoval that include reinstatement of
NEM, among other things. Nevada's Nov. 8, 2016 election ballot will include a proposed
constitutional amendment to implement full retail customer choice in the state. Currently in
Nevada, only large commercial and industrial customers have access to retail customer choice.
Modest Sales Growth
Total NVE retail electricity sales rose 1.7% in 2015 compared with 2014 levels, reflecting
strong residential, commercial and industrial sales at NPC and weak mining segment load at
SPPC. Retail sales are expected to be essentially flat in 2016 and increase 1.6% in 2017,
reflecting stronger nonresidential load growth at both NPC and SPPC. A solid service territory
economy, no state income tax and low business taxes support future growth, offset in part by
energy efficiency initiatives. Fitch believes competitive inroads from competing, alternative
energy resources, including distributed generation and energy efficiency, are a secular credit
concern for NVE that will prove manageable within the regulatory compact. NVE management
is focused on working with Nevada regulators and legislators to equitably balance the interests
of all constituents with regard to emerging growth in demand for distributed resources,
including rooftop solar.
Capex
NVE capex ranged from $372 million to $572 million in 2012-2015 and totalled $1.5 billion. By
comparison, capex is expected to approximate $1 .2 billion in 2016-2018. The lower
2016-2018 capex compares to NVE's prior guidance of $1 .7 billion. Lower capex reflects
removal of certain projects proposed by NVE to replace coal retirements mandated by S.B. 123
and rejected by the PUCN. The commission rejected planned construction by NVE of a 570
MW combined-cycle gas turbine in 2017 and investment in a 100 MW utility-scale photovoltaic
power plant in 2017. Fitch estimates NVE will be modestly FCF negative during 2016-2018.
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FitchRatings
Berkshire Hathaway Energy Company
October 27, 2016
S.B. 123
S.B. 123, enacted in 2013, mandates retirement of approximately 800 MW of generating
capacity starting in December 2014. The retired coal-fired generating capacity will be replaced
with a mix of renewable and natural gas-fired generation. NPC filed its emissions reduction and
capacity replacement (ERCR) plan in May 2014, which was approved by the PUCN in
October 2014. Under the PUCN-authorized ERCR plan, NPC will retire 812 MW of coal
generation and replace the coal generation retirements with a mix of renewable energy,
primarily through purchase power agreements. NPC retired Reid Gardner Generating Station
units 1, 2 and 3 in 2014 and plans to close unit 4 in 2017. In addition, NPC will eliminate its
ownership interest in the Navajo Generating Station in 2019. Enactment of S.B. 123 and PUCN
authorization of NPC's ERCR is a constructive development, in Fitch's view, that is reflected in
the company's current ratings.
Gas Transmission Business
BHE's gas transmission business is composed of Northern Natural Gas (NNG; A/Stable) and
Kern River Funding Corp. (KRF; A-/Stable), and delivers approximately 8% of the natural gas
consumed in the U.S. NNG and KRF contributed approximately 9% to BHE's consolidated
EBITDA in 2014.
NNG's natural gas transportation system is an essential source of contracted supply to its
Upper Midwest utility customer base and its reticulated system is well positioned, in Fitch's
view, with low business risk. Counterparty credit risk is ameliorated by the pipeline's diverse
group of primarily highly rated offtakers with multiyear contracts. NNG's ratings also consider
the pipeline operator's constructive regulatory compact and consistent ability to earn
reasonable ROEs.
KRF transports competitive Rocky Mountain natural gas to large-volume end users in Utah,
southern Nevada and Southern California. Recontracting risk and more stringent rules
regarding pipeline integrity and related issues are potential sources of concern for NNG and
KRF. However, Fitch believes these concerns are manageable within the pipelines' current
rating categories, given their strong competitive positions in their respective markets and
ongoing infrastructure investment by management.
Northern Powergrid Holdings Company
Northern Powergrid Holdings Company (NPG; BBB+/Stable) is a UK-based electricity
distribution group that is wholly owned by BHE. NPG, through its distribution network operator
(DNO) subsidiaries Northern Powergrid (Northeast) Limited (NPN; A-/Stable) and Northern
Powergrid (Yorkshire) pie (NPY; A-/Stable), serves a 10,000-square-mile service area in
Britain. NPG accounted for approximately 11 % of BHE's consolidated 2015 EBITDA. The
UK's low-carbon energy policy, integration of increasing distribution generation production
and efforts to modify consumer behavior will add a level of complexity to DNO operations.
Nonetheless, the DNOs are stable regulated businesses with growing, relatively predicable,
inflation-protected revenue and cash flow.
British energy regulator Office of Gas and Electricity Markets finalized its RI IO-ED1 (ED1) price
controls effective April 1, 2015 through March 31, 2023. Fitch believes ED1 is tougher than its
predecessor DPCR5, but considers ED1 to be credit neutral. ED1 authorizes a significantly
lower ROE and requires delivery of higher outputs with greater efficiency. NPN and NPY
delivered strong operating performance under DPCR5, and Fitch expects them to outperform
ED1 targets. Fitch's March 2016 rating affirmation of NPG and its subsidiaries with a Stable
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FitchRatings
Berkshire Hathaway Energy Company
October 27, 2016
Outlook considers the companies solid incentive performance under the new price control and
greater confidence that company performance will be consistent with ratio guidance, among
other things.
SHE Transmission
BHE Transmission represented approximately 8% of consolidated 2015 BHE EBITDA and is
comprised of BHE Canada Holdings Corp., including ALP and BHE U.S. Transmission. ALP is
an Alberta, Canada-based transmission operator with a proscriptive, credit-supportive
regulatory regime and low business risk profile. BHE completed the acquisition of ALP on
Dec. 1, 2014, acquiring the company's equity for approximately $2.7 billion. Factoring in
assumed debt, the transaction's enterprise value was approximately $7 billion. ALP operates
solely in the Alberta transmission market, where it provides access to wholesale markets to
power generators, utilities, retailers and industrial users. ALP, along with BHE's other
transmission assets, accounted for approximately 7.6% of consolidated 2014 BHE pro forma
EBITDA.
ALP is not subject to commodity or volumetric risk. Counterparty credit risk is significantly
reduced by exclusive billings to the Alberta Electric System Operator (AESO), a financially
robust offtaker. Rate shock concerns associated with the large build cycle underway in Alberta
are mitigated by a highly standardized, transparent provincial regulatory process.
ALP is regulated by the Alberta Utilities Commission (AUC), which under the Electric Utilities
Act is charged with providing ALP with a reasonable opportunity to recover prudently incurred
and forecast costs and a fair return on investment. Rates are established based on a forecast
test year on a cost-of-service basis. Once approved, revenue is paid to ALP by the AESO in
monthly installments. Cost of capital issues are bifurcated from GRCs in generic cost of capital
(GCOC) proceedings.
In its most recent GCOC proceeding , the AUC authorized an 8.3% ROE effective 2013-2015,
45 bp below the placeholder ROE included in ALP's last GRC of 8.75%. In addition, the AUC
reduced ALP's authorized common equity ratio to 36% from 37%. In Fitch's view, the sharp
reduction in ROE and lower equity ratio are concerns for investors from a credit perspective.
Renewables Business
BHE has invested in several utility-scale wind and solar generation projects that have long-term
purchase power agreements in place with creditworthy counterparties, and remains committed
to further development on a diversified basis. Future viable potential renewables investment
includes tax equity and distributed generation. In addition to renewables, BHE owns 10
geothermal facilities and a real estate brokerage, among other investments. Renewables and
other investments represented just less than 10% of consolidated EBITDA in aggregate.
Mergers and Acquisitions
BHE has been an active consolidator in the UPG sector, acquiring high-quality, low-risk electric
and gas utility, electric transmission and natural gas pipeline assets. Large acquisitions in
recent years include ALP for $7 billion enterprise value in December 2014, NVE for $10 billion
enterprise value in December 2013; and PPW for $9.5 billion enterprise value in 2006. Future
debt-financed transactions and/or acquisition of businesses with relatively high business risk
could pressure BHE's credit ratings.
9
FitchRatings
Organizational Structure
Organizational and Debt Structure -Berkshire Hathaway Energy Company
($ Mil., As of June 30, 2016)
MidAmerican
Energy Company
IDR -A-'Stable
Total
Adjusted Debt 4 300
Pac1f1Corp
IDR -A-/Stable
Total
Adjusted Debt 7 221
IDR -Issuer Default Rating.
Source: Company filings, Fitch.
Berkshire Hathaway Energy Company
October 27, 2016
Northern Natural Gas
Company
IDR -A/Stable
Total
Adjusted Debt 827
10
FitchRatings
Definitions
• Total Adjusted Debt/Op.
EBITDAR: Total balance sheet
adjusted for equity credit and
off-balance-sheet debt divided
by operating EBITDAR.
• FFO Fixed-Charge Coverage:
FFO plus gross interest minus
interest received plus preferred
dividends plus rental payments
divided by gross interest plus
preferred dividends plus rental
payments.
• FFO-Adjusted Leverage: Gross
debt plus lease adjustment
minus equity credit for hybrid
instruments plus preferred
stock divided by FFO plus
gross interest paid plus
preferred dividends plus rental
expense.
Berkshire Hathaway Energy Company
October 27, 2016
Key Metrics
Total Adjusted Debt/Op. EBITDAR
-Berkshire Hathaway Energy Company
(x)
8.0
7.0
6.0
5.0
4.0
3.0
2.0
-UPC Median
1.0 L__
0.0 -------------
2012 2013 2014
UPC -Ultimate parent company.
Source: Company data, Fitch.
FFO-Adjusted Leverage
2015 LTM
6/30/16
-Berkshire Hathaway Energy Company
(x)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-UPC Median
L'::::: -
2012 2013 2014
UPC -Ultimate parent company.
Source: Company data, Fitch.
2015 LTM
6/30/16
FFO Fixed-Charge Coverage
-Berkshire Hathaway Energy Company
-UPC Median
(x)
6.0
4.0
2.0
0.0
2012 2013 2014 2015 LTM
6/30/16
UPC -Ultimate parent company.
Source: Company data, Fitch.
Capex/Depreciation
-Berkshire Hathaway Energy Company
-UPC Median
(%)
350
300 ~
250 ~--........... u...a~ ~~~ L 100
50
0
2012 2013 2014 2015
UPC -Ultimate parent company.
Source: Company data, Fitch.
LTM
6/30/16
11
FitchRatings
Berkshire Hathaway Energy Company
October 27, 2016
Company Profile
BHE is 90% owned by BRK and is BRK's vehicle for expansion in the utilities, power and gas
sector. BHE M&A activity accelerated in 2013 and 2014 with the acquisitions of NVE and ALP.
BHE acquired PPW in 2006 for $9.5 billion enterprise value. As the result of the addition of
NVE, ALP and other investments, BHE revenue increased from $11 .5 billion in 2012 to
$17.9 billion in 2015. Meanwhile, EBITDA increased approximately 70% from $4.0 billion in
2012 to $6.8 billion in 2015 and total adjusted debt with equity credit increased from $22 billion
on Dec. 31 , 2012 to $39 billion on Dec. 31 , 2015. BHE's unregulated operations accounted for
11 % of consolidated, pro form a 2015 EBITDA and consist primarily of utility-scale wind and
solar projects with long-term purchase power agreements. BHE also owns 10 geothermal
facilities and a real estate brokerage, among other investments.
Business Trends
Revenue Dynamics
-Net Revenues (LHS) -Net Revenue Growth (RHS)
($ Mil.)
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2012 2013 2014 2015 LTM
6/30/16 Source: Company data, Fitch.
(%)
35
30
25
20
15
10
5
0
EBITDA Dynamics
-EBITDA (RHS) -EBITDA Margin (LHS)
($ Mil.) (%)
8,000 39
7,000 38
6,000 37
5,000 36
4,000 35 3,000
2,000 34
1,000 33
0 32
2012 201 3 2014 2015 LTM
6/30/16 Source: Company data, Fitch.
12
FitchRatings
Financial Summary -Berkshire Hathaway Energy Company
($ Mil., As of June 30, 2016, IDR -BBB+/Rating Outlook Stable)
Fundamental Ratios
Operating EBITDAR/(Gross Interest Expense+ Rents) (x)
FFO Fixed-Charge Coverage (x)
Total Adjusted Debt/Operating EBITDAR (x)
FFO/Total Adjusted Debt(%)
FFO-Adjusted Leverage (x)
Common Dividend Payout(%)
Internal Cash/Capex (%)
Capex/Depreciation (%)
Return on Equity(%)
Profitability
Revenues
Revenue Growth(%)
Net Revenues
Operating and Maintenance Expense
Operating EBITDA
Operating EBITDAR
Depreciation and Amortization Expense
Operating EBIT
Gross Interest Expense
Net Income for Common
Operating Maintenance Expense% of Net Revenues
Operating EBIT % of Net Revenues
Cash Flow
Cash Flow from Operations
Change in Working Capital
Funds from Operations
Dividends
Capex
FCF
Net Other Investment Cash Flow
Net Change in Debt
Net Equity Proceeds
Capital Structure
Short-Term Debt
Total Long-Term Debt
Total Debt with Equity Credit
Total Adjusted Debt with Equity Credit
Total Common Shareholders' Equity
Total Capital
Total Debt/Total Capital(%)
Common Equity/Total Capital(%)
IDR -Issuer Default Rating.
Source: Company data, Fitch.
Berkshire Hathaway Energy Company
October 27, 2016
2012 2013
3.2 3.4
4.2 4.1
5.4 7.0
24.6 17.4
4.1 5.7
128.0 108.4
232.3 276.1
9.8 9.5
11,548 12,635
3.4 9.4
8,031 8,836
(2,778) (2,794)
4,022 4,395
4,134 4,513
(1 ,455) (1,560)
2,567 2,835
(1,176) (1,222)
1,472 1,636
(34.6) (31.6)
32.0 32.1
4,327 4,669
150 491
4,177 4,178
(3,380) (4,307)
947 362
(450) (506)
534 5,079
1,000
887 232
20,735 32,012
21 ,684 30,947
22,241 31,723
15,866 18,711
37,469 49,763
58 61
42 37
2014 2016 LTM 6/30/16
3.4 3.4 3.3
4.4 4.1 3.9
6.3 5.6 5.6
20.9 21 .7 20.5
4.8 4.6 4.9
78.5 118.8 109.8
318.7 242.0 213.7
10.7 11.1 10.5
17,326 17,880 17,373
37.1 3.2 (1 .5)
11,594 12,801 12,812
(3,501) (3,732) (3,682)
6,103 6,756 6,703
6,249 6,917 6,864
(2,057) (2,428) (2,505)
4,046 4,328 4,198
(1,711) (1,904) (1,897)
2,095 2,370 2,369
(30.2) (29.2) (28.7)
34.9 33.8 32.8
5,146 6,980 6,218
(1,170) 649 338
6,316 6,331 5,880
(6,555) (5,875) (5,354)
(1 ,409) 1,105 864
8 (268) (592)
3,799 (146) (455)
(36)
1,445 974 1,469
38,649 37,972 36,881
38,197 37,474 37,378
39,141 38,762 38,658
20,442 22,401 23,357
58,770 60,009 60,877
63 61 60
34 37 38
13
FitchRatings
The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS PLEASE READ THESE
LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK
HTTPSJ/FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE
TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE
AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM
THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALllY, CONFLICTS OF INTEREST, AFFILIATE
FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE
TO THE RATED ENTllY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH
THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTllY CAN BE FOUND ON THE ENTllY SUMMARY PAGE
FOR THIS ISSUER ON THE FITCH WEBSITE.
Copyright© 2016 by Fitch Ratings, Inc., Frtch Ratings Ltd. and its subsidiaries. 33 WhitehaD Street NY, NY 10004. Telephone:
1-800-753-4824, [phone]. Fax: [phone]. Reproduction or retransmission in v.tiole or in part is prohibited except
by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports Qncluding forecast
information), Fitch relies on factual information it receives from issuers and underwiters and from other sources Frtch believes to
be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance wth its ratings
methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are
available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party
verification it obtains v.ill vary depending on the nature of the rated security and its issuer, the requirements and practices in the
jurisdiction in v.tlich the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public
information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such
as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other
reports provided by third parties, the availability of independent and competent third-party verification sources wth respect to the
particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports
should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the
information Fitch relies on in comection wth a rating or a report v.ill be accurate and complete. Ultimately, the issuer and its
advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and
other reports. In issuing its ratings and its reports, Frtch must rely on the work of experts, including independent auditors wth
respect to financial statements and attorneys v.ith respect to legal and tax matters. Further, ratings and forecasts of financial and
other information are inherently forward-looking and embody assumptions and predictions about Mure events that by their
nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by
Mure events or conditions that v.ere not anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" wthout any representation or warranty of any kind, and Fitch does not represent
or warrant that the report or any of its contents v.ill meet any of the requirements of a recipient of the report. A Fitch rating is an
opinion as to the creditv.orthiness of a security. This opinion and reports made by Fitch are based on established criteria and
methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product
of Fitch and no individual, or group of indMduals, is solely responsible for a rating or a report. The rating does not address the
risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of
any security. All Fitch reports have shared authorship. lndMduals identified in a Frtch report v.ere involved in, but are not solely
responsible for, the opinions stated therein. The indMduals are named for contact purposes only. A report providing a Fitch
rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer
and its agents in connection wth the sale of the securities. Ratings may be changed or v.ithdra'Ml at any time for any reason in
the sole discretion of Fitch. Frtch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell,
or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular
investor, or the tax-€xempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers,
insurers, guarantors, other obligors, and undeM1iters for rating securities. Such fees generally vary from US$1,000 to
US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Frtch v.ill rate all or a number of issues issued by
a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected
to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assigrment, publication, or dissemination
of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection wth any registration
statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom,
or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishng and distribution, Frtch
research may be available to electronic subsaibers up to three days earlier than to print subsaibers.
For Australia, Nev,, Zealand, Taiwan and South Korea only: Frtch Australia Ply Ltd holds an Australian financial services license
(AFS license no. 337123) v.tiich authorizes it to provide credit ratings to v.tlolesale dients only. Credit ratings information
published by Fitch is not intended to be used by persons v.tio are retail dients v.ithin the meaning of the Corporations Act 2001.
Berkshire Hathaway Energy Company
October 27, 2016
14
FitchRatings
FITCH DOWNGRADES VARIOUS
NON-FI CORPORATES' S-T RATINGS
Fitch Ratings-New York/Chicago-21 October 2016: Fitch Ratings has downgraded the Short-Term
Issuer Default Ratings (ID Rs), commercial paper and related short-term instrument ratings for
the issuers listed below. No other ratings for these issuers, including their Long-Term IDRs, issue
ratings, or Outlooks have been changed.
KEY RA TING DRIVERS
The downgrades are a result of Fitch's updated Criteria for Rating Non-Financial Corporates
master criteria, which was published on Sept. 27, 2016. The update clarifies that where there are
short-term rating cusps in the 'A' category Fitch opts for the lower option. Thus, 'A+' long-term
ratings have a 'Fl' short-term rating and 'A-' long-term ratings have a 'F2' short-term rating.
The time horizon of short-term ratings does not explicitly relate to the 13 months immediately
following a given date. Instead, it relates to the continual liquidity profile of the rated entity that
would be expected to endure over the time horizon of the Long-Term IDR, typically one economic
cycle. This approach places less emphasis on favourable or unfavourable features of the liquidity
profile when they are considered temporary.
Short-term ratings are linked to long-term ratings as liquidity and near-term concerns are part of
the long-term credit profile review. Cusps exist on the short-term scale, where Fitch groups may
opt to assign higher or lower short term rating equivalents. When the long-term rating is in the 'A'
category, the higher short-term option is common for sovereigns and banks, which have access
to fiat currency creation and discount windows. In comparison, even higher-rated corporates do
not typically possess the kinds of additional liquidity options ( e.g. fiat currency creation, discount
window access) available to the strongest sovereign and bank issuers.
KEY ASSUMPTIONS
There have been no changes to the existing rating assumptions for each issuer included in this
review. Please see Fitch's previously issued press release/company report related to the issuers
included in this review for Fitch's key assumptions.
RA TING SENSITIVITIES
There have been no changes to the existing rating sensitivities for each issuer included in this
review. Please see Fitch's previously issued press releases or company reports related to the issuers
included in this review for Fitch's rating sensitivities.
FULL LIST OF RA TING ACTIONS
Fitch has downgraded the short-term ratings for the following issuers:
Gulf Power Company
MidAmerican Energy Company
NextEra Energy Capital Holdings, Inc. (formerly FPL Group Capital Inc.)
PacifiCorp
Peoples Gas Light and Coke Co.
Southern Company
Wisconsin Gas LLC
--Short-Term IDR and short-term ratings to 'F2' from 'Fl'.
Contacts:
Primary Analyst (Gulf Power Company, NextEra Energy Capital Holdings, Inc. (formerly FPL
Group Capital Inc.), Southern Company)
Secondary Analyst (Peoples Gas Light and Coke Co., Wisconsin Gas LLC)
Shalini Mahajan, CF A
Managing Director
+ 1-212-908-0351
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
Primary Analyst (MidAmerican Energy Company, PacifiCorp)
Philip Smyth, CF A
Senior Director
+ 1-212-908-0531
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
Primary Analyst (Peoples Gas Light and Coke Co., Wisconsin Gas LLC)
Philippe Beard
Director
+ 1-212-908-0242
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
Secondary Analyst (Gulf Power Company, Southern Company)
Julie Jiang
Director
+ 1-212-908-0708
Secondary Analyst
Kevin Beicke, CFA (MidAmerican Energy Company, PacifiCorp)
Director
+ 1-212-908-0618
Secondary Analyst (NextEra Energy Capital Holdings, Inc. (formerly FPL Group Capital Inc.)
Maude Tremblay, CFA
Director
+ 1-312-368-3203
Committee Chairperson
Rolando Larrondo
Group Credit Officer
+ 1-212-908-9189
Media Relations: Alyssa Castelli, New York, Tel: [phone], Email:
[e-mail].
Date of Relevant Rating Committee:
Gulf Power Company: May 12, 2016
MidAmerican Energy Company: Nov. 24, 2015
NextEra Energy Capital Holdings, Inc.: July 29, 2016
PacifiCorp: Nov. 24, 2015
Peoples Gas Light and Coke Co.: Aug. 17, 2015
Southern Company: May 12, 2016
Wisconsin Gas LLC: Aug. 17, 2015
Summary of Financial Statement Adjustments -There have been no changes to the existing
financial statement adjustments for each issuer included in this review. Please see Fitch's
previously issued press release/company reports related to the issuers included in this review for
Fitch's financial statement adjustments.
Additional information is available on www.fitchratings.com.
Applicable Criteria
Criteria for Rating Non-Financial Corporates (pub. 27 Sep 2016)
https://www.fitchratings.com/site/re/885629
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS
AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COWUNDERSTANDINGCREDITRATINGS. IN
ADDITION, RA TING DEFINlTIONS AND THE TERMS OF USE OF SUCH RA TINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB
SITE AT WWW.FITCHRA TINGS.COM. PUBLISHED RA TINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE
AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE,
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS
SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THLRD PARTIES.
DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE
FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY !0004. Telephone: l-800-753-4824, (212)
908-0500. Fax: [phone]. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing
and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and
underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it
in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources
are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it
obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security
is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and
its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports,
engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification
sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and
reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies
on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the
information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the
work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings
and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by
their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or
conditions that were not anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the
report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a
security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating.
Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or
a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged
in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely
responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus
nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities.
Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort.
Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers,
insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$!,OOO to US$750,000 (or the applicable
currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a
particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency
equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in
connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United
Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may
be available to electronic subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no.
337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used
by persons who are retail clients within the meaning of the Corporations Act 2001