Moody's ups Allegheny; may cut FirstEnergy

Moody's Investors Service said it affirmed the ratings and stable outlooks of FirstEnergy Corp. (Baa3 senior rating) and its regulated utilities and placed the ratings for FirstEnergy Solutions Corp. (Baa2 senior rating) under review for possible downgrade.

Moody's upgraded the bank facility rating at Allegheny Energy, Inc. to Baa3 from Ba1 and affirmed the ratings and stable rating outlooks for its operating subsidiaries.

The rating action reflects the expectation that the merger between FirstEnergy and Allegheny Energy will be consummated shortly, Moody's said. The merger, which was announced on Feb. 11, received all needed regulatory approvals.

The affirmation considers the increased scale and scope of the merged entity and the potential to achieve significant synergies, as well as the expectation for near-term improvement in the company's consolidated balance sheet through debt reduction, the agency said.

The rating upgrade of Allegheny Energy's bank credit facility reflects the lack of any funded debt at the holding company level, the diversification benefits that will come to Allegheny Energy as being a part of larger and more diverse organization, and the expectation that the company's modest holding company working capital needs will be satisfied in the future at the FirstEnergy level, Moody's said.

The review for possible downgrade for FirstEnergy Solutions was triggered by a reduction in the price for electricity that has impacted the company's financial performance, the agency said.

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