ngpl finch ratings update

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NEW YORK - (Business Wire) Fitch Ratings has affirmed the Issuer Default Rating (IDR) and outstanding senior unsecured debt ratings for NGPL PipeCo LLC (NGPL) at 'BBB-'. The Rating Outlook is Stable. The rating action affects $3 billion of outstanding debt. NGPL is 80% owned by Myria Acquisition Inc. (Myria), a consortium of investors including two Babcock & Brown managed funds, a Canadian pension fund and a Netherlands pension fund, and 20% owned by Knight Inc. (IDR 'BB+'; Stable Outlook by Fitch).

NGPL's ratings and Stable Outlook reflect the predictable cash flows generated by its FERC regulated pipeline assets, a favorable competitive market position, limited liquidity needs, a conservative growth strategy and low regulatory risk. NGPL is one of the largest interstate pipeline and storage systems in the U.S. While the Chicago/Midwest market that it delivers into is served by several competing pipelines, NGPL boasts favorable rate structures and has been able to maintain its strong market position.

Substantially all of its pipeline capacity is committed under contracts ranging from one to five years with an average contract length of 2.6 years. The average contract length is relatively short. However, NGPL has been able to mitigate capacity re-contracting risk and modestly increase its revenues from contract rollovers. In addition, NGPL's position is enhanced by its access to diverse and resource-rich supply areas and deliverability to a high quality, utility dominated customer base.

The ratings also consider several offsetting factors. Based on Fitch estimates, NGPL will continue to tend toward the higher ranges of leverage for investment grade pipelines, with Debt/EBITDA expected to fall between 4.0 times (x) and 5.0x over the next several years. In addition, NGPL exhibits some sensitivity to commodity prices through its operational efficiency sales. As a result, absent the benefit of hedges, revenues would be expected to decline in a softening natural gas price environment. Finally, as with other pipeline systems, NGPL is exposed to margin deterioration as the U.S. pipeline infrastructure continues to evolve and natural gas supply, demand and price dynamics change.