Moody’s Investors Service has placed the ratings of DTE Energy (NYSE:DTE) under review for downgrade, Moody’s said Sept. 27 following news of a major DTE acquisition.
DTE has announced that it will purchase midstream pipeline and gathering assets in the southwest Marcellus / Utica shale regions for about $1.3 bn.
The ratings of DTE’s utility subsidiaries, DTE Electric Co. (DTE Electric, A2) and DTE Gas Co. (DTE Gas, Aa3 senior secured) are not under review and their outlooks are stable, Moody’s said.
“The review for downgrade is prompted by DTE’s plans to increase its exposure to gas midstream assets which, by their nature, have more volatile earnings and cash flow streams than DTE’s primary electric and gas utility, pipeline, and gas storage assets,” Moody’s said.
The review will focus on DTE’s acquisition financing plan that will initially result in approximately $1.3bn of additional parent company debt. “As a result, the percentage of parent company debt within DTE’s capital structure will increase to over 30% versus around 22% as of year-end 2015,” Moody’s said.
On Sept. 26, DTE announced an agreement to purchase 100% of the Appalachia Gathering System (AGS) located in Pennsylvania and West Virginia, and 40% of Stonewall Gas Gathering (SGG) in West Virginia, from Momentum Midstream.
In addition, DTE will purchase 15% of SGG from Vega Energy Partners. The assets gather natural gas produced in the southwest Marcellus / Utica regions, and provide access to markets in the Midwest, Ontario and Northeast through interconnections with Columbia Gas Transmission, Texas Eastern Transmission and the NEXUS Gas Transmission project currently being developed by DTE and Spectra Energy.
The transaction is expected to be completed in October 2016.