The Rating Also Rises
There’s reason for investors and customers to be bullish about UNS Energy.
Last week the Arizona Corporation Commission by unanimous vote approved the settlement agreement on Fortis/UNS Energy merger. The agreement provides the foundation for the Arizona utility’s acquisition by the Canadian utility, Fortis. Fortis acquires all outstanding shares of UNS Energy at a price of $60.25 per share –a 30 percent premium over the share price immediately prior to announcement of the acquisition late last year. Additionally, Fortis will inject $220 million of equity capital through UNS Energy into the holding company’s Arizona regulated utilities, which will further improve the financial and credit metrics of UNS Energy and the regulated utilities and assist in the purchase of gas-fired generation to diversity its power supply to customers.
AIC’s testimony submitted earlier this year identified the credit upgrades (LINK) that could result from Fortis’ capacity to lend financial support to UNS Energy and its Arizona utilities, Tucson Electric Power Company, UNS Energy Services and UNS Gas.
Well, we didn’t have to wait very long to see the results.
Following the swift action by the ACC to process and approve the acquisition application, Fitch Ratings upgraded TEP’s unsecured credit rating one notch to BBB+. Moody’s Investor Service changed its ratings outlook for the entire family of UNS Energy from “stable” to “positive”. The improved credit ratings will enable better access to credit markets and lower the cost of capital for TEP, which will translate into lower pressure on electricity rates for customers. This is in addition to the $30 million in bill credits afforded TEP customers over five years as part of the settlement agreement.
To its credit, the ACC has dramatically improved the regulatory climate facing investor owned utilities in the state much to the benefit of investors and customers alike. Its swift and thoughtful dispensation of the Fortis/UNS Energy matter is yet another example.