Moody’s gives Baa1 to AEP Texas

Moody's Investors Service said it assigned a Baa1 issuer rating to American Electric Power Co., Inc.'s (AEP, Baa1 stable) newly created Texas transmission and distribution subsidiary, AEP Texas Inc.

The company was formed on Dec. 31 via the merger of AEP's two Texas transmission and distribution utilities AEP Texas Central Co. (TCC) and AEP Texas North Co. (TNC).

Concurrently, the agency withdrew the Baa1 issuer ratings and stable outlooks for TCC and TNC and affirmed the Baa1 senior unsecured ratings on the debt AEP Texas assumed from TCC and TNC.

The outlook for AEP Texas is stable.

Moody’s said the Baa1 issuer rating reflects AEP Texas' position as a fully regulated, primarily transmission and distribution (T&D) utility that benefits from Texas' supportive and transparent regulatory environment. These positive credit factors are balanced against a relatively leveraged but stable financial profile, a significant ongoing capital expenditure program and a service territory exposed to cyclical industries such as petroleum refining, petrochemicals and oil and gas extraction, the agency added.

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