Fitch: Tucson Electric view positive

Fitch Ratings said it affirmed the issuer default rating of Tucson Electric Power Co. at BB+ and revised the outlook to positive from stable.

Key rating drivers include stable earnings and cash flows, continued focus on debt reduction and regulatory process, high but improving debt leverage, exposure to changes in environmental rules and regulations, and interest rate risk exposure on variable-rate debt securities, the agency said.

The affirmation reflects the companys stable earnings and cash flows, competitive electric rates, an improving debt leverage profile including lower levels of variable-rate debt and successful renegotiation of its bank agreement in November 2010, the agency noted.

Commodity price risk is mitigated by the company's purchase power and fuel adjustment clause, the agency added.

Concerns include high debt leverage, limited room under debt-to-capitalization leverage restrictions in the company's bank agreements and frozen non-fuel base rates through 2012, Fitch said.

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