Fitch Removes Iberdrola USA's Ratings from Neg Watch; Affirms CMP, NYSEG & RG&E's Ratings

  Fitch Removes Iberdrola USA's Ratings from Neg Watch; Affirms CMP, NYSEG &
  RG&E's Ratings

Business Wire

NEW YORK -- November 25, 2013

Fitch Ratings has affirmed the following ratings for Iberdrola USA (IUSA):

--Long-term Issuer Default Rating (IDR) at 'BBB';

--Senior unsecured debt rating at 'BBB'.

In addition, IUSA's ratings have been removed from Rating Watch Negative. The
Rating Outlook is Stable.

Concurrently, Fitch has affirmed the IDRs and debt ratings of Central Maine
Power Company (CMP), New York State Electric and Gas Corp. (NYSEG) and
Rochester Gas & Electric Corp. (RG&E). The Rating Outlooks for CMP and NYSEG
are Stable. The Rating Outlook for RG&E is Positive.

A full list of ratings follows at the end of this press release.

KEY RATING DRIVERS

--Ownership of three low-risk regulated electric and natural gas transmission
and distribution utilities;

--Consummation of the corporate reorganization;

--IUSA will not assume any debt as part of the reorganization;

--Adequate utility ring-fencing features support Fitch's assessment of the
utilities on a stand-alone basis;

--Balanced regulatory treatment in New York and Maine;

--Solid utility financial profiles;

--Adequate liquidity afforded through a separate IUSA and the joint operating
company bank credit facilities.

Iberdrola USA Rating Rationale

Effective Nov. 21, 2013 Iberdrola Renewables Holdings, Inc. (Holdings, Not
Rated by Fitch) has been consolidated under the IUSA corporate umbrella as
part of a restructuring of U.S.-based investments by ultimate parent Iberdrola
S.A. (ISA, rated 'BBB+' IDR; Rating Watch Negative by Fitch). IUSA remains a
wholly-owned subsidiary company of ISA. Concurrently, an intermediate holding
company, Iberdrola USA Networks (Networks, Not Rated by Fitch), has been
established between IUSA and its regulated utility subsidiary companies. There
is no debt outstanding at Networks. Fitch does not consider the reorganization
to have materially changed IUSA's financial profile.

IUSA has not assumed any debt as a result of the reorganization.
Post-reorganization, for analytical purposes, Fitch estimates total
consolidated long-term debt at nearly $2.6 billion, representing a combination
of utility long-term debt obligations. As part of reorganization, Holdings
assumed a $350 million IUSA senior note obligation previously held at an ISA
affiliate company. This intra-company note is eliminated in IUSA's
consolidated financial statements and Fitch considers IUSA as essentially
unlevered.

Holdings' funding has been funded primarily with equity capital contributions
from ISA. With the exception of a sale-leaseback transaction executed earlier
in 2013, IUSA has no liability, contingent or otherwise, in connection with
any Holdings project. In April 2013 IUSA provided a guarantee of Holdings'
payment obligations of principal and interest over the next 25 years on the
$110 million San Luis Solar sale-leaseback transaction.

Low leverage, liquidity and the positive tax benefits generated by Holdings'
renewable investments will improve IUSA's near-term financial condition, in
Fitch's opinion. The rating forecast assumes available cash-on-hand will be
distributed to ultimate parent ISA. Post-reorganization, Fitch estimates over
60% of total consolidated EBITDA from regulated utility operations.

Capital Investments

Holdings' funding needs, as forecast by Fitch, are modest reflecting a
materially scaled-back renewable investment plan. Spending levels are being
driven primarily by current power pricing dynamics and uncertainties related
to the renewal of certain investment tax incentives, including production tax
credits (PTCs). Should future levels of capital investment at Holdings be
substantially higher than that currently forecast by Fitch, and require
external funding, consolidated financial metrics could be pressured with the
potential for negative rating action. Fitch's forecast assumes no investment
in the company's natural gas storage and transport business, a smaller
component of Holdings and, in Fitch's opinion, non-strategic to Holdings'
growth strategy.

Regulated utility spending levels remain consistent with Fitch's prior rating
assessments. The New York utilities' capex plan is focused primarily on system
modernization, including the replacement of obsolete and aging equipment.
Fitch's forecast reflects higher spending levels on transmission and
sub-transmission hardening starting in 2015.

CMP's 'Maine Power Reliability Project' (MPRP) remains on schedule and on
budget with 74% of the project budget spent through August 2013. MPRP is a
multi-year $1.4 billion transmission build-out intended to improve system
reliability and grow CMP's rate base. Construction started in 2010, with
project completion forecast for 2015. FERC regulatory treatment is viewed
favorably by Fitch, and includes a 12.89% return on equity (ROE) and 100%
Construction Work in Progress (CWIP). The FERC-approved ROE at project
completion will be subject to the final outcome of a challenge to New England
transmission ROEs currently pending with the FERC. Resolution is expected by
Fitch in 2014, but is not expected to have ratings implications.

Adequate Liquidity

Consolidated bank credit consists of an IUSA five-year bank credit facility
sized at $300 million which expires in 2018 and on which IUSA is a sole
borrower, and a joint operating company five-year bank credit facility sized
at $600 million which expires in 2017. Each utility has a borrowing sub-limit
sized commensurate with funding needs: CMP's sub-limit is $300 million;
NYSEG's is $200 million; and RG&E's is $100 million. Utility bank credit
backs-up commercial paper programs at CMP and NYSEG.

Holdings does not have stand-alone bank credit; rather, the company is a
participant in the ISA money pool and is both borrower and lender to
inter-IUSA borrowing arrangements. IUSA liquidity is supplemented by
inter-company borrowing arrangements, including a five-year $600 million ISA
borrowing arrangement on which IUSA is a borrower. At Sept. 30, 2013 IUSA had
no borrowings outstanding. The ISA borrowing arrangement is backed up by a
consolidated adjusted liquidity position of Euro 12.2 billion at Nov. 12,
2013, including Euro 10.1 billion in available bank credit. ISA liquidity is
sufficient to cover more than 30 months of consolidated ISA financing needs.

Utility Rating Rationales

The ownership interest of CMP, NYSEG and RG&E is unchanged after consummation
of the corporate reorganization. Management also remains unchanged. Both the
Maine Public Utilities Commission (MPUC) and the New York Public Service
Commission (NYPSC) approved the IUSA corporate reorganization, with respective
conditions designed to further strengthen utility protection features and
effectively insulate the regulated companies from potential risks related to
IUSA unregulated, competitive market affiliate companies. Fitch views
regulatory features afforded the utilities as supportive when assessing the
companies on a stand-alone basis.

Utility Outlooks continue to reflect balanced regulatory treatment, solid
financial metrics, adequate liquidity and manageable debt re-financings.

Balanced Regulatory Treatment

CMP currently operates under an alternative rate plan (ARP) that spans through
2013, and in May 2013 the utility filed for a new five-year ARP for new rates
effective July 2014. The current rate plan adjusts CMP's delivery rates
annually based on changes in the Consumer Price Index (CPI), less a 1%
productivity offset. In an order dated April 4, 2013, the MPRP established a
minimum equity ratio, requiring CMP maintain a 13-month average equity ratio
equal to the equity ratio assumed in the utility rate structure, which is 47%.

NYSEG and RG&E are currently operating in the third year of a three-year
distribution rate plan. While the utilities are not required to make a new
rate filing for new rates effective Jan. 1, 2014, Fitch anticipates storm-cost
recovery could be a key driver for a rate filing in 2014, with new rates
effective in 2015. No decision has been made by management as to the timing of
a potential rate filing. In an order dated Nov. 5, 2013, the NYPSC laid out
several conditions tied to approval of the IUSA corporate restructuring,
including a minimum equity ratio tied to the utilities' rate-making capital
structure of 48%. Also, for rate making purposes, the commission provided that
the utilities be held harmless from any adverse tax consequences that could
occur through unregulated affiliate companies.

Utility Financial Metrics

The regulatory construct afforded RG&E includes features such as revenue
decoupling, a commodity pass through mechanism and a forward test year for
determining new rates, all of which support the utility's improved credit
profile. Also, while the local economy has been negatively affected by the
recent economic downturn, the utility's credit profile improved in part due to
rate-making features, in Fitch's opinion. EBITDA-to-Interest and FFO-to-Debt
for the latest twelve months (LTM) ended Sept. 30, 2013 were 3x and 28.6%,
respectively. Fitch forecasts EBITDA-to-Interest and Debt-to-FFO to remain
above 3x and 20%, respectively over the next several years. The rating
forecast assumes higher capital spending levels starting in 2015, funding of
which could pressure leverage metrics. Fitch would look for Debt-to-EBITDA to
fall below 3.6x on a sustainable basis as a trigger for positive rating
action. As with NYSEG, Fitch considers effective cost control as key to
maintaining a stable financial profile.

CMP financial metrics, as calculated by Fitch, remain robust relative to
guidelines for the risk profile and rating category. EBITDA-to-Interest and
FFO-to-Debt for the latest twelve months (LTM) ended Sept. 30, 2013 were 5.4x
and 34.4%, respectively. Fitch forecasts EBITDA-to-Interest at or higher than
6x through 2017; however, the impact of higher debt levels associated with
elevated capital spending will pressure financial metrics, with Debt-to-EBITDA
forecast by Fitch to reach 4x over the next several years. Higher cash taxes
related to the end of the bonus depreciation period will pressure FFO metrics,
too. Fitch's forecast also reflects estimates consistent with management's
expectations for the earnings impact of a lower FERC ROE at CMP-Transmission,
starting in 2015. Fitch continues to view adherence to the MPRP completion
schedule and budget, as well as timely recovery of project costs as key to a
stable financial profile during this capital-intensive period.

NYSEG financial metrics, as calculated by Fitch, remain solid relative to
guidelines for the risk profile and rating category. EBITDA-to-Interest and
FFO-to-Debt for the latest twelve months (LTM) ended Sept. 30, 2013 were 4.7x
and 22.9%, respectively. Fitch forecasts EBITDA-to-Interest and Funds from
Operations (FFO)-to-Debt to remain above 4x and 19%, respectively through
2017, with higher interest and higher cash taxes adding pressure to financial
metrics. Effective cost control remains essential to maintaining a stable
financial profile, in Fitch's opinion.

Debt Re-financings

Fitch considers IUSA consolidated current maturity profile manageable, with
$23 million in 2014; $135 million in 2015; $182 million in 2016; and, $202
million in 2017. As the debt maturities are tied to the utilities' long-term
debt obligations, Fitch views CMP's, NYSEG's and RG&E's access to the debt
capital markets as unrestricted.

RATING SENSITIVITIES

--IUSA: no positive rating action is currently under consideration.

--IUSA: a material increase in parent-level debt, intended to manage affiliate
company funding needs, could adversely impact the company's credit profile.

--CMP: execution of MPRP limits positive rating action at this time.

--NYSEG: no positive rating action is currently under consideration.

--RG&E: continued improvement in financial metrics at RG&E could lead to a
ratings upgrade.

--CMP, NYSEG and RG&E: adverse regulatory treatment that negative impacts the
financial condition of any utility could place pressure on the respective
utility ratings.

Fitch has affirmed the following ratings:

IUSA

--IDR 'BBB';

--Senior unsecured debt at 'BBB'.

--Removed from Rating Watch Negative.

The Rating Outlook is Stable.

Fitch has affirmed the following ratings with a Stable Outlook:

CMP

--IDR at 'BBB+';

--Senior secured debt at 'A';

--Senior unsecured debt at 'A-';

--Preferred Stock at 'BBB';

--Short-term IDR at 'F2';

--Commercial Paper 'F2'.

NYSEG

--IDR at 'BBB+';

--Senior unsecured debt and revenue bonds at 'A-';

--Short-term IDR at 'F2;

--Commercial Paper 'F2'.

Fitch has affirmed the following ratings with a Positive Outlook:

RG&E

--IDR 'BBB-';

--Senior secured debt at 'BBB+';

--Senior unsecured debt at 'BBB';

--Short-term IDR at 'F3'.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'Rating North American Utilities, Gas and Water Companies' (May 16, 2011);

--'Recovery Ratings and Notching Criteria for Utilities' (Nov. 19, 2013);

--'Corporate Rating Methodology: Including Short-term Ratings and Parent and
Subsidiary Linkage' (Aug. 5, 2013).

Applicable Criteria and Related Research:

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

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

Recovery Ratings and Notching Criteria for Equity REITs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=722363

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=809412

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Contact:

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