Moody’s to review AmerenUE debt ratings

Moody’s Investor’s Service put AmerenUE  on notice Tuesday: The utility’s long-term Baa1 debt rating may be cut a notch on concerns that cash flow is insufficient to cover rising operating costs and big investments needed for transmission system upgrades and pollution controls at its coal-fired power plants.

“Continued deterioration of cash flow coverage metrics would not be consistent with its current Baa1 (debt) rating,” Michael G. Haggarty, Moody’s senior credit officer, said in a statement.

Moody’s said it’s review of AmerenUE’s rating will focus on how the utility will finance capital expenditures and other factors, including “the potential for increased regulatory supportiveness in Missouri.”

Even if AmerenUE is cut by Moody’s, the ratings service said it will almost certainly be just one notch, meaning the utility would maintain its investment-grade rating. Currently, AmerenUE’s Baa1 rating is three levels above junk. For a list of Moody’s ratings definitions, see here.

Credit ratings are especially important metrics for utilities when they go out to borrow money.  A better rating means better borrowing terms; while a ”junk” rating means higher interest expenses and can require that they renegotiate terms of loans and credit agreements.

While being notified by Moody’s that it’s debt rating may be lowered may be unwanted news for AmerenUE, expect it to be an important talking point for utility officials this spring when they go to Jefferson City to seek a rate increase.