Vectren Corp. And Subsidiaries Downgraded To 'BBB+' On Close Of Acquisition By CenterPoint Energy

  • CenterPoint Energy Inc. (CenterPoint) completed its $8.5 billion acquisition of Vectren Corp. (Vectren) after receiving regulatory approvals in Indiana and Ohio.
  • S&P Global Ratings lowered its issuer credit rating (ICR) on Vectren to 'BBB+' from 'A-' and removed the rating from CreditWatch, where it was placed with negative implications on April 24, 2018. The outlook is stable.
  • We lowered the ICRs on Vectren's subsidiaries: Vectren Utility Holdings Inc. (VUHI), Indiana Gas Co. Inc. (IGC), and Southern Indiana Gas & Electric Co. (SIGECO), all to 'BBB+' from 'A-', and removed the ratings from CreditWatch. The outlook on each entity is stable.
  • We lowered our ratings on VUHI and IGC's senior unsecured notes to 'BBB+' from 'A-'. The 'A' rating and '1+' recovery rating on the SIGECO's first mortgage bonds are unchanged. VUHI's short-term rating is unchanged at 'A-2'.
  • The stable outlook on Vectren Corp. and its subsidiaries reflects that of new parent CenterPoint Energy Inc. The stable outlook on CenterPoint and its subsidiaries reflects our expectation of stable financial measures for the consolidated company, consistency in the projected mix of utility and non-utility businesses, and steady regulatory support. Our baseline CenterPoint consolidated forecast for 2019 and 2020 includes adjusted funds from operations (FFO) to debt in the 14%-16% range.
DALLAS (S&P Global Ratings) Feb. 1, 2019—S&P Global Ratings today took the 
rating actions listed above. The downgrade of Vectren and its subsidiaries 
reflects our view that Vectren, VUHI, SIGECO, and IGC are core subsidiaries of 
parent CenterPoint Energy Inc. This reflects our expectation that all four 
entities are highly unlikely to be sold and have a strong long-term commitment 
from CenterPoint's senior management. Therefore, we align our issuer credit 
ratings on Vectren and its subsidiaries with CenterPoint's group credit 
profile of 'BBB+'. 

The stable outlook on Vectren Corp. and its subsidiaries reflects that of new 
parent CenterPoint Energy. The stable outlook on CenterPoint and its 
subsidiaries reflects our expectation of stable financial measures for the 
consolidated company, consistency in the projected mix of utility and 
non-utility businesses, and steady regulatory support. Our baseline 
CenterPoint Energy consolidated forecast for 2019 and 2020 includes adjusted 
FFO to debt in the 14%-16% range.

We could lower ratings on Vectren and its subsidiaries over the next two years 
if CenterPoint Energy's consolidated financial measures materially weaken 
reflecting FFO to debt consistently below 13%. This could occur if the 
company's ability to effectively manage regulatory risk weakens or if it sees 
material increases in the costs of large projects. Although we do not consider 
this likely, we could lower the ratings if business risk were to materially 
increase for CenterPoint Energy's consolidated operations.

We could raise ratings on Vectren and its subsidiaries over the next two years 
if CenterPoint Energy's consolidated financial measures improve, reflecting 
FFO to debt that is consistently greater than 18%, without a material increase 
in business risk. This could occur if CenterPoint would delever the capital 
structure over the next two years while undertaking its capital spending 
plans.