OREANDA-NEWS. Fitch Ratings has assigned an 'A+' rating to Public Service Company of Colorado's (PSCo) $250 million, 3.55% first mortgage bonds (FMBs) due June 15, 2046. The FMBs will rank pari passu with PSCo's other senior secured obligations.

The Rating Outlook on PSCo's 'A-' Long-Term Issuer Default Rating (IDR) is Stable.

Net proceeds will be used for general corporate purposes, including the repayment of short-term debt and the funding of the utility's capex program.

KEY RATING DRIVERS

Low-Risk Business Profile: PSCo's ratings primarily reflect the low-risk business profile and stable cash flows of the utility's regulated integrated electric and natural gas distribution operations.

Balanced Regulation: PSCo's ratings also reflect a relatively balanced and stable regulatory environment in Colorado. Supportive regulatory mechanisms include adjustment clauses for fuel costs and purchased power, trackers for pension expense and property taxes, and riders for electric and natural gas transmission investments and cost compliance related to renewable energy and the Clean Air Clean Jobs Act (CACJA).

Elevated Capex: Fitch expects PSCo's capex to average approximately $1 billion per year through 2020. Key drivers of capex include investments associated with the CACJA, projects related to gas pipeline integrity, and distribution system enhancement. Fitch expects PSCo to finance capex in a manner consistent with its currently authorized capital structure.

Strong Financial Metrics: PSCo's credit profile benefits from strong financial metrics. Fitch forecasts adjusted debt/EBITDAR to average around 3.4x over 2016-2018, with FFO adjusted leverage around 3.8x and FFO fixed-charge coverage around 6.4x.

Standard Notching: There is a moderate-to-strong linkage between the IDRs of parent Xcel Energy Inc. (Xcel; 'BBB+'/Stable Outlook) and each of its subsidiaries. The linkages originate primarily from strategic drivers. Each subsidiary is important to Xcel, and the parent financially supports its subsidiaries when needed via equity infusions and funding the inter-company money pool. Fitch considers a one - to two-notch differential between the IDRs of Xcel and its subsidiaries to be appropriate.