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Archive for Wednesday, September 4, 2002

Moody’s downgrades Aquila’s credit to junk status

September 4, 2002

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— Moody's Investors Service on Tuesday lowered Aquila Inc.'s credit rating to junk status, but the energy company said the decision will not affect its operations.

Moody's decision means the company must pay $192 million in obligations within 60 days.

"While we're naturally disappointed by the news, we've been preparing to conduct business operations under this possible scenario and will continue to deliver safe, reliable and economical energy to our customers," Robert K. Green, president and chief executive officer of Aquila, said.

The company has cash and liquidity on hand for $754 million, said spokesman Al Butkus.

"We're very confident that we can meet our obligations," Butkus said. "It's disappointing. But we just do our planning, keep doing what we're doing and continue to rebuild."

In August, officials with Kansas City, Mo.-based Aquila made presentations to Standard & Poor's Corp., Moody's and Fitch Ratings about its efforts to shore up its credit rating by cutting costs, conserving cash and selling assets.

Those moves have included hundreds of layoffs, reducing its dividend and returning its focus to regulated utilities rather than energy trading.

Standard & Poor's currently rates Aquila's debt two notches above junk-bond status but has the company's rating on a credit watch. Fitch rated Aquila's debt one step above junk.

Butkus said if Standard & Poor's also downgrades the company's credit rating to junk, it would have to make $484 million in debt payments and additional postings of collateral. He said Fitch's ratings would not trigger any further obligations.

The company cited several steps it has taken in the past six months to improve its status.

In August, Aquila announced it would be out of the wholesale energy business by the end of September, once again depending almost entirely on income from regulated utilities and unregulated power generation.

After the shutdown of the energy trading business, the company will market energy only from assets the company owns or controls, Aquila said.

Shares of Aquila closed Tuesday at $3.78, down 15 cents, on the New York Stock Exchange.

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