CHICAGO, May 19 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
upgraded MidAmerican Energy Holding`s (MEHC) senior unsecured debt to `BBB`
(Triple-B) from `BBB-` (Triple-B-Minus) and TIDES to `BBB-` (Triple-B-Minus)
from `BB+` (Double-B-Plus). MEHC was placed on Rating Watch-Up in October
1999 following the proposed acquisition by an investment group lead by
Berkshire Hathaway, Inc., which has since been completed. Approximately
$2.3 billion of securities are affected.
The parentage and exceptional financial flexibility of Berkshire Hathaway
(BRK) will lend considerable implied financial strength to MEHC. MEHC will
provide BRK with a platform to make additional strategic investments in the
energy sector. With respect to future strategic investments made by MEHC,
management has committed to maintain the company`s credit profile in-line with
solid investment-grade parameters.
MEHC has successfully executed a strategy that has transformed its
business profile from a pure generation company with significant higher-risk
international exposure to a vertically integrated electric and gas concern
with a more limited degree of international exposure. MEHC has successfully
developed skill-sets in the lower-risk electric distribution business and
critical knowledge in electricity and natural gas marketing from its
investment and experience in the fiercely competitive UK electric and natural
gas marketplace. When these skill-sets are coupled with established and
recognized strengths of developing and operating generating assets, the
prospects for establishing a Midwest foothold in both the lower-risk electric
and gas distribution business and the higher-risk electric generation
marketplace bode well for a risk-balanced strategy.
MEHC`s cash flows are derived from the investment-grade quality
distributions from the Iowa-based electric and gas utility, MidAmerican Energy
(rated `AA-` (Double-A-Minus) senior secured), the UK-based electric and gas
distribution and supply company, Northern Electric (rated `A` (Single-A)) and
CE Generation LLC (rated `BBB` (Triple-B)), a 50 percent-owned power project
holding company with U.S. geothermal and gas-fired power projects.
International investments introduce a higher degree of business risk and
include the company`s Philippine power production facilities, which continue
to enjoy predictable cash flow and operational performance.
Positively, MEHC has received full recovery of its claims related to its
OPIC-insured Indonesian investments.
At the end of 2000, MEHC will derive more than 80 percent of its EBITDA
from highly rated regulated entities in very stable sovereign environments.
Still, the company remains highly leveraged and cash flow coverages remain
weak for the `BBB` category. After 2000, MEHC`s pro forma debt/total capital
is projected to be approximately 70 percent, with EBITDA/total interest
coverage expected to be greater than 3.0 times and EBITDA/debt ratio greater
than 25 percent.
Through its retail utility subsidiaries, MidAmerican Energy in the United
States and Northern Electric in the UK, MEHC provides electric service to
2.0 million electricity customers and natural gas service to 1.2 million
customers worldwide. Through its subsidiaries, MEHC manages and owns
interests in and has under contract approximately 10,000 net megawatts of
diversified power generation facilities in operation, construction and
development.
Berkshire Hathaway, Inc. is a holding company owning subsidiaries in a
variety of business sectors. The company`s principal operations are insurance
businesses conducted nationwide on a primary-insurer basis and worldwide on a
reinsurance basis. Berkshire Hathaway`s other operations include The Buffalo
News, aviation training, retail furniture businesses, shoe manufacturing and
candy manufacturing.
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
CONTACT:
John W. O`Connor, 312-368-2059,
oconnor@dcrco.com or Doug Laskowski, 312-368-2053 or
laskowski@dcrco.com, both of DCR
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