S&P lowers Empire District's rating

Empire officials disputed the rating, saying plant improvements are necessary to serve the growing region the utility serves and that the company’s recent acquisition of Aquila Inc.’s Missouri natural gas distribution operations protects it from seasonal revenue fluctuations.

The company’s $84 million acquisition of Aquila’s natural gas distribution operations is scheduled to close on June 1.

The company’s corporate credit rating falls to BBB- from BBB, senior secured debt to BBB+ from A-, and senior unsecured debt rating to BB+ from BBB-.

S&P affirmed the company’s short-term rating of A-3 and said its outlook for Empire is stable.

According to a news release from the company, S&P said, “The downgrade reflects Standard & Poor’s view that Empire’s financial measures will be constrained over the next several years by fuel and power costs that continue to exceed the level recoverable in rates, and by Empire’s higher-than historical level of capital spending, including the (Aquila) acquisition.”

“I am disappointed with the action taken by Standard & Poor’s.” Empire President and CEO Bill Gipson added, “We have a rate case pending before the Missouri Public Service Commission where the key issue is the recovery of fuel and purchased power expense.”

On Feb. 1, Empire filed an electric rate case with the PSC seeking to increase annual electric revenues by approximately $29.5 million, or 9.63 percent. The bill for the average residential customer would increase approximately $11.11 a month. Hearings on the proposed rate increase are scheduled for June 26 and 27 in Joplin and June 27 in Reeds Spring.

Gipson also addressed the company’s capital spending plans for the next few years.

“This building program has become necessary to meet the increasing needs of our growing customer base,” Gipson said.

“We are located in an area of the country that has continually seen robust growth and projections call for this trend continuing. We must build power facilities and other infrastructure to serve this growth,” Gipson added.

The company recently agreed to pay $87 million for partial ownership of a coal-fired plant in Arkansas. Empire also is in the midst of a $60 million project at its Riverton, Kan., Power Plant.

Empire’s primary business is providing power to 162,000 customers in southwest Missouri, southeast Kansas, northeast Oklahoma and northwest Arkansas.

Shares of Empire (NYSE: EDE) closed at $22.04 on May 24, compared to a 52-week range of $19.25 to $25.01.

This story originally appeared in SBJ’s May 19 free e-news Daily Update. Click here to register.[[In-content Ad]]