Fitch Affirms Ratings of ConEd & Subsidiaries at 'BBB+'; Outlook Stable

  Fitch Affirms Ratings of ConEd & Subsidiaries at 'BBB+'; Outlook Stable

Business Wire

NEW YORK -- October 22, 2013

Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) and debt ratings
of Consolidated Edison Inc. (NYSE: ED) and its subsidiaries Consolidated
Edison Company of New York, Inc. (CECONY), Orange & Rockland Utilities, Inc.
(ORU), and Rockland Electric Company (RECO). Fitch has also affirmed the
ratings of the New York State Energy Research and Development Authority's
(NYSERDA) issued debt of which CECONY and ORU are the obligors. The Rating
Outlook for all entities is Stable. Approximately $11 billion of long-term
debt is affected by today's rating actions. A complete list of rating actions
appears at the end of this release.

KEY RATING DRIVERS

ED's rating affirmation is supported by the predictable earnings and operating
cash flows generated by its low-risk regulated transmission and distribution
utility subsidiaries, whose businesses operate in relatively balanced
regulatory frameworks that allow for full recovery of fuel and commodity
costs, forward-looking test years, multi-year rate plans and revenue
decoupling in New York.

ED's earnings and operating cash flows are derived almost entirely from
CECONY, which accounted for approximately 93% of consolidated EBITDA, while
ORU accounted for 6% for the latest 12-month (LTM) period ended June 30, 2013.
Consequently, ED's financial profile and credit quality are strongly tied to
the financial health and credit quality of CECONY. ED's exposure to its
non-regulated competitive energy businesses is modest and has no impact on the
credit profiles of ED and utility subsidiaries at this time.

In January 2013, CECONY filed a rate case before the New York Public Service
Commission (NYPSC). The utility is requesting an electric rate increase of
$417 million, a gas rate increase of $27 million, and a steam rate increase of
$8 million, based on a 10.1% ROE and a 50% common equity ratio. Increased
operating and maintenance expenses and recovery of capital investments,
including approximately $242 million of deferred restoration costs related to
Hurricane Sandy, drive the rate request. A decision by the NYPSC is expected
in December 2013, with new rates effective in January 2014.

Fitch's analysis reflects the perceived increased regulatory risk and
uncertainty associated with CECONY's pending rate case. The rate case has been
the subject of intense scrutiny and political backlash, illustrated by
Governor Cuomo publicly urging the NYPSC to reject CECONY's request to
increase rates. The utility's performance and restoration efforts in the
aftermath of Hurricane Sandy, when service to approximately 1.4 million
customers was interrupted over several days, and the more recent service
disruption to Metro-North train system, have drawn negative publicity and
renewed criticism of the utility. A new provision in the Public Service Law
has strengthened the NYPSC's oversight and enforcement mechanisms to hold New
York utilities more accountable for poor operating performance and customer
service.

Fitch's conservative Base Case scenario models that the utility receives below
50% of its rate request and an authorized ROE below 10%, consistent with the
low authorized ROEs recently granted for other New York utility peers. In that
scenario, Fitch projects CECONY's 2014 funds from operations (FFO)/interest
and FFO/debt to be 4.7x and 18%, respectively, slightly below Fitch's
benchmark ratios for the current rating category. ED's FFO/interest and
FFO/debt are projected to be 4.9x and 19.2%, in line with Fitch's target
ratios for the 'BBB+' rating category. Forecasted FFO-based metrics also
reflect the expiration of bonus depreciation and other tax credits that
boosted cash flows over recent years.

In the event that the rate decision is more punitive than assumed by Fitch,
2014 leverage metrics would be more in line with benchmark ratios for the
'BBB' rating category. However, Fitch would expect CECONY to implement
aggressive cost control measures if faced with such a scenario, in order to
maintain a stable credit profile.

Fitch believes the current rate proceeding is likely to result in a one-year
rate order, in which case management would file a new rate case in 2014, for
rates to take effect in January 2015. In that scenario, Fitch projects
CECONY's FFO/interest and FFO/debt to average 4.7x and 19.5%, respectively,
over 2015-2017, while ED's FFO/interest and FFO/debt are projected to average
4.8x and 19.9%, respectively, over the same forecast period.

The Stable Outlook assumes a rate filing in 2014, with a balanced rate
decision in 2015 that would support the utility's projected peak capital
spending of approximately $4.4 billion over 2015-2016.

Conversely, a series of unfavorable rate decisions would strongly suggest a
deterioration of the New York regulatory compact, and could affect all related
entities due to strong linkages across the corporate family.

Management expects consolidated capital expenditures to amount to
approximately $11.8 billion over the forecast period, including $10.3 billion,
or 90% of total, at CECONY and $716 million, or 6% of total, at ORU. Utility
capital spending is earmarked primarily towards replacement of aged
infrastructure, enhancement of network reliability, and system expansion,
including heating oil to gas conversions of residential and commercial
buildings in New York City, which management projects will support gas peak
growth of 3.8% over the forecast period. Projected capex also includes a
proposal to spend approximately $1 billion on storm hardening measures over
2013-2016.

Fitch expects ED's internally generated cash flows (after dividends) to
support on average between 70% and 80% of consolidated capital spending over
the forecast period, with the balance funded using the debt capital markets.

Fitch considers consolidated liquidity to be solid. ED has access to $1
billion available under an approximately $2 billion shared bank credit
facility that expires in October 2017. As of June 30, 2013, there were $1,434
million of consolidated borrowings outstanding, including commercial paper
borrowings, under the credit facility. There was $747 million of cash on hand.
Fitch considers consolidated debt maturities to be manageable, with $481
million due in 2014, $495 million due in 2015, and $731 million due in 2016.
Fitch expects the utilities to enjoy adequate access to debt capital markets
to refinance debt maturities.

On the legal front, ED's unwinding of its cross-border lease investments
(LILO) as part of the August 2013 IRS settlement regarding prior disallowance
of tax deductions, supports credit quality and alleviates one of Fitch's prior
rating concerns regarding ED's cash flow exposure in this matter. The IRS had
previously disallowed a total of $574.3 million of tax losses on audit of ED's
1997 through 2011 tax returns. Management estimates the net negative cash flow
impact from the LILO decision to be less than $150 million.

Fitch's rating affirmation of ORU and RECO is based on projected credit
metrics that are solid for the current rating category. Fitch forecasts
FFO/interest to range between 5.0x and 5.5x, and FFO/debt to range between 22%
and 24% respectively, over the 2014-2017 forecast period. For the latest 12
months ended June 30, 2013, FFO/interest and FFO/debt were 4.7x and 21%,
respectively.

ORU is operating under a three-year electric rate plan that stipulates
levelized rate base increases of $15.2 million effective July 1, 2012, 2013,
and 2014. The plan includes an increasing authorized ROE, i.e. 9.4%, 9.5%, and
9.6% over the three-year period, which accounts for the potential for interest
rates to increase with an expanding economy. Fitch projects ORU to earn its
authorized ROE over the forecast period. Fitch expects ORU's financial profile
to further benefit from projected tariff increases in the gas business and at
subsidiaries RECO and Pike.

RATING SENSITIVITIES

Future developments that may, individually or collectively, lead to a positive
rating action:

Given current rating levels, no positive rating action is anticipated at this
time for ED and subsidiaries.

Future developments that may, individually or collectively, lead to a negative
rating action:

A significant deterioration in the New York regulatory compact, reflected by a
pattern of unfavorable rate orders, or the utilities' inability to recover
fuel and commodity costs on a timely basis, would likely lead to negative
rating actions across the corporate family.

A determination by Fitch that cash flow measures of FFO/interest above 4.0x
and FFO/debt above 17% become unsustainable would likely lead to negative
rating actions.

Although not anticipated by Fitch, a significantly larger than expected
customer refund resulting from the NYPSC's investigation of CECONY's prior
contracting practices could pressure the credit profile and lead to negative
rating actions. As of June 30, 2013, a cumulative amount of $1,246 billion
previously collected in rates is subject to customer refund. ED has publicly
stated it is exploring a settlement with the NYPSC Staff to resolve this
matter, and that it expects any potential refund to range between $16 million
and $208 million.

Fitch has affirmed the following ratings with a Stable Outlook:

ED

--Long-term IDR at 'BBB+';

--Short-term IDR at 'F2';

--Commercial Paper at 'F2'.

CECONY

--Long-term IDR at 'BBB+';

--Short-term IDR at 'F2';

--Commercial Paper at 'F2';

--Senior Unsecured Debt at 'A-'.

ORU

--Long-term IDR at 'BBB+';

--Short-term IDR at 'F2';

--Commercial Paper at 'F2';

--Senior Unsecured Debt at 'A-'.

RECO

--Long-term IDR at 'BBB+'.

NYSERDA

--Issues relating to CECONY projects at 'A-';

--Issues relating to ORU projects at 'A-'.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Rating North American Utilities, Power, Gas and Water Companies' (May 16,
2012);

--'Recovery Ratings and Notching Criteria for Utilities' (Nov. 12, 2012);

--'Short-Term Ratings Criteria for Non-Financial Corporates' (July 27, 2012).

Applicable Criteria and Related Research:

Short-Term Ratings Criteria for Non-Financial Corporates

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=714415

Recovery Ratings and Notching Criteria for Utilities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693750

Rating North American Utilities, Power, Gas, and Water Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=625129

Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=805713

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Contact:

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