s&p on utilities

Comment from S&P that although BBB+ remains the rating levels that the regulator uses to determine allowable return, creditworthiness is negatively affected.
More of an issue for BBI as the bulk of its regulated entities trade at lower than peer credit ratings and will need to inject extra capital to maintain or improve ratings. Clearly this reduces cashflow from the subs over the next few years



MELBOURNE (Standard & Poor's) May 4, 2009--Standard & Poor's Ratings
Services
said today that the Australian Energy Regulator's (AER) final decision on the
weighted-average cost-of-capital (WACC) parameters that will affect
electricity network companies at their next regulatory price reset has no
immediate implications for the ratings on the following companies: The
CitiPower Trust (A-/Stable/--), Powercor Australia LLC (A-/Stable/A-2), ETSA
Utilities Finance Pty Ltd. (A-/Stable/--), SP AusNet Group (A-/Negative/--),
United Energy Distribution Holdings Pty Ltd. (UED; BBB/Stable/--), and
ElectraNet Pty Ltd. (BBB+/Negative/A-2).
Nevertheless, we consider the AER decision to be adverse for the sector's
creditworthiness. The regulator's decision will lower regulated cash flow and,
without any corrective actions, erode the already-thin credit metrics of these
companies. No immediate rating actions have been taken, however, as we expect
these companies to adopt capital-structure remediation strategies over the
next 12 months to preserve their respective financial profiles and support
their credit ratings. We note that the financial flexibility available to this
sector includes lowering discretionary capital expenditure, reducing
distributions, and raising new equity. A lack of action in support of credit
quality by one or all of these companies could lead to rating downgrade of at
least one notch.
The Victorian electricity network companies (CitiPower, Powercor, UED,
and SP AusNet) will be subject to the first application of the new regulatory
framework, with a price reset scheduled to begin in July 2010.