S&P places MDU on watch

S&P said it placed its ratings for MDU Resources Group Inc. and its subsidiaries Cascade Natural Gas Corp. and Centennial Energy Holdings Inc. on CreditWatch with negative implications.

MDU plans to spinoff its Knife River subsidiary into a separate publicly traded company.

“Knife River contributes about 35% of MDUR's EBITDA, thus we expect the spinoff to significantly alter the composition of the company. While we acknowledge that MDUR will derive a larger proportion of its revenue from its lower-risk regulated utilities following the transaction, Knife River's building materials business is currently a material source of cash flow and the spinoff will lessen the company's business-line diversity, which currently leads us to apply one notch of uplift to our rating,” S&P said in a press release.

The negative watch placements reflect the possibility of lower ratings on the companies by up to one notch over the next several months to reflect MDUR's potential loss of business diversity after the Knife River spinoff with financial measures for MDUR remaining in line with the agency’s base case, S&P said.

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