NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects modest earnings growth for the U.S. utilities, power and gas (UPG) sectors in 2014, based on rate base additions and commercial operation of new capex projects, according to a report published today. The sectors' credit outlook is stable.
Broad macroeconomic conditions are favorable for the industry with modest economic growth, tepid inflation, low natural gas prices and a favorable interest rate environment. Fitch expects regulated utilities to maintain their solid investment grade profiles. The industry is capital intensive with a large backlog of infrastructure investments projects to be developed over the next few years. Bank credit and capital markets access are essential ingredients in maintaining the industry's strong liquidity.
Issuer Default Ratings (IDRs) on utility and utility parent companies in Fitch's portfolio should remain on the cusp of the 'BBB+' to 'A-' range.
From an overall sector outlook however, Fitch notes that business line and regional distinctions are emerging as key operating differentials in its analysis of the UPG sector. Gas utilities have a positive sector outlook while electric utilities have a stable sector outlook and competitive generators (gencos) have a negative sector outlook.
The electric industry faces stagnant growth prospects as the recent trend of declining per-capita consumption is expected to continue, if not accelerate. Efficiency, driven by favorable economics and fostered by federal and state energy policies will erode electricity sales for the foreseeable future. Outside of the U.S. Sun Belt region, Fitch expects declining electricity sales in most areas.
For the gencos, efficiency and demand side management programs (DSM) continue to constrain load growth as well as lower peak load. While sector fundamentals remain negative, the credit profile of noninvestment grade independent generators has stabilized with consolidation, while the higher-rated affiliated gencos may continue to face ratings and outlook pressure.
The full '2014 Outlook: Utilities, Power and Gas' is available at 'www.fitchratings.com.'
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2014 Outlook: Utilities, Power, and Gas (Electricity Sales Unplugged)