Fitch Ratings has assigned an 'A+' rating to Northern States Power Company-Wisconsin (NSP-Wisconsin) issuance of
The FMBs rank pari passu with NSP-Wisconsin's other senior secured obligations. Net proceeds from the FMB issuance will be used to replay a
NSP-Wisconsin's Long-Term Issuer Default Rating (IDR) is 'A-' with a Stable Rating Outlook.
Key Rating Drivers
Constructive Regulatory Environment: NSP-Wisconsin operates within a constructive regulatory environment overseen by the
Rate Case Outcome: In
Large Capex Plan: Fitch's main rating concern is the relatively large capex plan over the forecast. NSP-Wisconsin plans to spend
Adequate Financial Metrics: Fitch expects NSP-Wisconsin's financial metrics to remain supportive of existing ratings, despite a large capital investment plan over the forecast. Fitch forecasts FFO leverage to average 3.8x-4.0x through 2028.
Parent-Subsidiary Linkage: There is parent-subsidiary linkage with
Fitch also evaluates the access and control factor as porous. Xcel centrally manages the treasury function for its utilities and is the sole source of equity. However, each subsidiary issues its own long-term debt. Fitch would allow the utilities' Long-Term IDRs to be up to two notches higher than Xcel's Long-Term IDR.
Derivation Summary
The credit profiles of NSP-Minnesota and NSP-Wisconsin are similar and well positioned at an 'A-' Long-Term IDR. The credit profile of PSCo is modestly weaker positioned vs. its sister utilities. PSCo, NSP-Minnesota and NSP-Wisconsin all operate within relatively constructive regulatory environments with reasonably good rates of return. However, PSCo's earned returns lagged allowed due to historical test year filings. PSCo's business risk is higher, as it operates in a state with elevated wildfire risk exposure and faces potential wildfire liabilities, unlike its sister utilities.
All three entities have large capex plans, but timely cost recovery in their respective regulatory jurisdictions mitigates high capex issues. PSCo and NSP-Minnesota benefit from larger scale and scope of operations than NSP-Wisconsin.
The three entities' financial metrics are well positioned within their rating category, but Fitch expects PSCo's leverage to remain modestly higher than the other two utilities due to the large capex program and assumed
Key Assumptions
Total base capex of
Rate case outcomes consistent with historical rate orders;
Tax credit transferability included in the financing plan;
Normal weather.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
A positive rating action is unlikely in the near term due to the large capex plan;
FFO leverage expected to remain less than 3.5x on a sustained basis.
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
FFO leverage expected to exceed 4.5x on a sustained basis;
A material deterioration of the regulatory environment that meaningfully reduces the stability and
predictability of earnings and cash flow;
A shift in management strategy that results in weaker financial support from Xcel.
Liquidity and Debt Structure
Adequate Liquidity: Fitch considers liquidity for Xcel and its utility subsidiaries adequate. They all primarily meet short-term liquidity needs through the issuance of CP under each of their RCFs, all of which expire in
Liquidity is also available to PSCo, NSP-Minnesota and SPS through participation in an intercompany money pool. Borrowing limits are set at
Issuer Profile
NSP-Wisconsin is a regulated integrated electric and natural gas utility that serves approximately 0.3 million electric customers and 0.1 million natural gas customers in
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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