Fitch Ratings has assigned an ‘A’ rating to Gulf Power Co.’s (Gulf Power) issuance of $100 million series 2012A 3.10% senior notes due May 15, 2022. The notes are senior, unsecured obligations of Gulf Power.
The rating outlook is stable.
Gulf Power plans to use the net proceeds from the offering for the proposed redemption of the $61 million series F 5.60% senior insured quarterly notes due April 1, 2033 and a portion of the $60 million series H 5.25% senior notes due July 15, 2033, to repay a portion of its outstanding short-term debt and for general corporate purposes, including its continuous construction program.
Gulf Power had outstanding short-term debt of $94 million as of May 14, 2012.
The ratings and Stable Outlook for Gulf Power reflect predictable cash flows from regulated electric operations, a slow but steady improvement in retail sales after a deep economic downturn, return to a more orderly and constructive regulatory environment and steadily improving credit metrics from 2009 cyclical lows.
Gulf Power’s service territory continues to see slow but steady improvement in the local economy with economic indicators such as housing starts, unemployment and income growth, all showing positive trends.
Gulf Power achieved a constructive outcome in its recently concluded rate case. The Florida Public Service Commission authorized a $64.1 million rate increase for Gulf Power and an additional $4 million step up increase in 2013. The rate increases are based on a midpoint Return on Equity (ROE) of 10.25% and an authorized retail ROE range of 9.25 – 11.25%.
The utility enjoys several rate riders that provide timely recovery of all prudent costs related to fuel, purchased costs and environmental expenditures. While Gulf Power is heavily dependent on coal fired generation capacity that must comply with stringent emissions standards, the fuel and environmental recovery clauses promote timely recovery of associated costs.
Gulf Power benefits from ownership by the Southern Co., (IDR rated ‘A’; Stable Outlook by Fitch), a multi-utility holding company in the Southeast.