Moody’s shifts AEP Texas view to negative

Moody’s Investors Service said it revised the outlook for AEP Texas Inc. to negative from stable, citing the company’s current capital and financing plans and recent regulatory developments.

“The negative outlook on AEP Texas is driven by Moody’s expectation that the company’s financial profile will weaken as it executes its significant capital expenditure program against a backdrop of what appears to be increased regulatory uncertainty in Texas. AEP Texas’ capital investment program is one of the largest and fastest growing within the AEP organization and, while it is entirely focused on lower risk transmission and distribution networks, the sheer magnitude of the program, combined with the negative cash flow impacts of federal tax reform, will put negative pressure on credit metrics,” said Laura Schumacher, a Moody’s senior credit officer, in a press release.

AEP Texas also has a pending rate case, which if there’s an adverse result, could lead to higher leverage, Moody’s said.

Moody’s affirmed AEP Texas’ ratings, including its Baa1 senior unsecured and issuer ratings.

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