Contact Energy shielded from Edison's credit problems - so far

Contact, which has a triple B-plus/negative A-2 credit rating, is 48 percent owned by Edison, a US-based company which has struck difficulties with its largest subsidiary.

S&P said financing convenants with Edison Mission Midwest Holdings Co and its affiliates are preventing cash distributions to EME.

Contact Energy is New Zealand's most diversified energy company, with a presence in both electricity and gas businesses.

S&P said Contact Energy's rating was insulated by, among other things, a degree of ring-fencing between EME's holding company for its shares in Contact Energy (Mission Energy Pacific Holdings) and EME; the high proportion of independent directors on Contact Energy's board; and the different jurisdictions which EME and Contact Energy operated in.

The relatively small scale of Contact Energy compared with that of the EME group internationally, the strong fiduciary requirements of Contact's New Zealand board members, and its high level of transparency by virtue of being listed here, were also viewed as positive features.

However, the agency said a lower than double B-plus fall in EME's credit quality did have the potential to negatively affect Contact Energy. Edison currently has a triple B-minus corporate rating.

"A substantial downgrade of EME or a change in the financial policy that could result in less cash being retained at Contact Energy may put downward pressure on Contact Energy's rating."

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

UPDATE Contact increases dividend as FY earnings rise; quits wind projects
Contact increases dividend as FY earnings rise in competitive market
Contact shares drop to 2-month low, says 'hard to see' investment under Labour-Greens plan
Contact Energy, parent Origin mull redemption of $2.03 bln of notes after S and P change
Solid first half for Contact, despite retail margins squeeze
Contact sells mothballed New Plymouth power station for $24 mln
Contact Energy's King hints at greater returns as cash mounts
Contact energy beats FY profit forecast as revenue surges
Elliott leaving Contact for Origin role
Contact sees 2014 cash-flow boost as projects put on ice