S&P: Cascade Natural Gas Corp. 'BBB+' Rating Affirmed; Outlook Stable
"Our issuer credit rating on Cascade is based on our assessments of its strong business risk profile and intermediate financial risk profile," said S&P Global Ratings credit analyst Tyler Smith.
The strong business risk profile reflects the company's lower-risk regulated utility that has generally supportive regulation in Oregon and Washington and a primarily residential and commercial customer base that supports cash flow stability. Offsetting this is the company's small customer base in its lightly populated two-state service territory and per capita income in its service territories that is weaker than the national average.
Our stable rating outlook reflects our expectation that management will continue to focus on its core utility operations and reach constructive regulatory outcomes to avoid any meaningful rise in business risk. The outlook also reflects our base case forecast level of adjusted FFO to debt of about 26%, in line with the lower end of the range for the intermediate financial risk profile category.
We could lower ratings on Cascade if we downgrade parent MDU Resources or if Cascade's financial risk profile weakens significantly due to prolonged deterioration in financial measures including FFO to debt below 23%. We could also lower ratings if, in our opinion, there is material degradation in the current insulation measures and we lower ratings on parent MDU.
Higher ratings are contingent on either an upgrade on ultimate parent MDU Resources or a higher stand-alone credit profile on Cascade. Cascade's stand-alone credit profile could improve if its financial measures strengthened and consistently exceeded our base-case forecast, including adjusted FFO to total debt consistently in the middle of the range for the intermediate financial risk profile category, or FFO to debt of 27%-31%.