S on Algonquin Power Utilities Corp
NEW YORK, Oct 22 (Reuters) Standard Poor Ratings Services assigned its long term corporate credit rating to Ontario based holding company Algonquin Power Utilities Corp. (APUC). (BBB /Positive/ ). The rating on APUC reflects what we view as a strong consolidated business risk profile and significant consolidated financial risk cheap moncler coats mens profile. In our view, the strong consolidated business risk profile reflects uk moncler outlet stable regulated cash flows from Liberty and somewhat less stable cash flows from APCo largely contracted electricity generation asset portfolio due to volumetric risk. We believe APCo exposure to asset concentration risk mutes the benefits of portfolio diversity.
APCo and Liberty are two wholly owned subsidiaries of APUC. As of June 30, 2012, APUC consolidated reported debt outstanding (including its convertible debentures) was about C$460 million. Convertible debt of C$62 million is the only debt at the holding company level and the remainder resides at APCo cheap moncler jackets mens and Liberty.
We view rising stable, regulated cash flows as positive to APUC consolidated business risk profile. Upon completing its proposed acquisitions and development projects, we expect EBITDA contributions from moncler sale online Liberty will increase to 40% 50% of APUC consolidated EBITDA in the medium term from about 18% at Dec. 31, 2010. Consistent with our expectations, EBITDA contributions from Liberty rose to about 35% of APUC consolidated EBITDA at Dec. 31, 2011. However, we also view the company growth appetite as aggressive, exposing it to execution and integration risk. We understand APCo plans to double its generation capacity through acquisitions and development projects (in wind and solar generation). In addition, Liberty plans to increase its businesses rapidly, tripling its expected EBITDA mainly through acquisitions.
APCo earnings are largely insulated from electricity demand and price fluctuations in the markets where its facilities are located, but are exposed to hydrology and best moncler jackets wind resource volatility. We estimate long term power purchasing agreements (PPA) with strong counterparties support 85% 90% of APCo EBITDA. The average remaining PPA life is 12 years and most have automatic inflation escalators linked to Canadian CPI.
We believe moncler outlet production volatility from APCo portfolio could increase somewhat, given aggressive plans to build wind facilities. As of Dec. 31, 2011, hydro generation (about 47% of the total), wind (about 30%), and thermal generation (about 23%) supported APCo EBITDA. Upon completion https://www.monclerdownjacket.biz of its moncler online store announced wind and solar projects, we forecast wind generation will generate 50% 60% of APCo EBITDA, with the balance from hydro (about 30%), thermal, and solar generation. Given limited historical wind data, we view cash flows from wind generation assets as somewhat less predictable than that of hydro generation. We view cash flows from solar and thermal sources as more predictable than those of wind.
APCo cash flows are exposed to asset concentration, which we believe limits the benefits of portfolio moncler usa diversification. We estimate that its 10 largest assets generate 80% 90% of EBITDA. We believe its hydro assets geographic diversity is limited. In addition, the complex and dispersed nature of the company electricity generation portfolio requires understanding of multiple technologies and markets, which in our view limits operational efficiencies.
We moncler womens jackets consider Liberty regulated utility business risk profile to be excellent, with a favorable competitive position, supportive regulation, and largely stable service territories. The company regulatory framework includes what we consider reasonable moncler uk outlet allowed returns on equity on cheap moncler jackets its rate base. Consistent with our expectations, it recently acquired natural gas distribution assets in Missouri, Illinois, and Iowa; and New Hampshire moncler outlet based electricity and natural gas distribution utilities. Accordingly, we estimate about 25% of Liberty cash flow will discount moncler jackets come from water and wastewater utilities, 30% from moncler sale electric utilities, and the remaining 45% from gas utilities. We expect additional regulatory and geographic moncler outlet sale diversity once cheap moncler sale the company completes the acquisitions of moncler outlet woodbury natural gas and water utilities in Georgia and Arkansas in 2013. Nevertheless, we think variations in usage volumes and cash flows are likely. Liberty will need to manage its regulatory risk effectively to achieve its constructive regulatory goals and earn its allowed rates of return.
In our uk moncler sale view, APUC has a significant financial risk profile. We estimate that the company will have adjusted funds from operations (AFFO) moncler outlet prices to total debt of 15% 17% in 2013 and 2014, cheap moncler jackets womens assuming it executes its announced acquisitions and power generation development projects. On Dec. 31, 2011, its AFFO to total debt was 15.7%, and adjusted debt to EBITDA was 4.6x. Standard Poor assessment incorporates the following expectations and assumptions:
The company consolidated liquidity sources, including FFO and credit facility availability, will likely exceed its uses 1.2x or more in the moncler sale outlet next 12 months.
We believe that net sources will remain positive even in the event of an unforeseen earnings decline of 15%.
APUC liquidity sources include our estimated C$145 million of annual FFO, APCo committed credit facility (C$72 million out of C$155 million was available June 30, 2012), moncler outlet store and Liberty committed credit facility (C$8 million of C$41 million was available June 30).
APUC liquidity uses include our estimated dividend payment of about C$85 million, immaterial maturing debt, and about C$50 million of maintenance and core capital expenditures. The outlook also reflects our expectations that APUC will achieve sustained AFFO moncler outlet online to total debt of 15% 20%, with Liberty regulated cash flow supporting 40% 50% of its consolidated cash flows by 2014. We could raise the rating a notch upon the company meeting these expectations. Conversely, if it does not meet our expectations or its sustained AFFO to debt falls below 15% during our two year outlook horizon, we would revise the outlook to stable.
Research Update: Liberty Utilities Co. Assigned Corporate Credit Rating; Is Positive, July 24, 2012.