(S&P)
NEW YORK Aug. 22, 2006-Trimmed earnings and subsequently lower cash flow stemming from this summer's power outages may further depress Consolidated Edison Inc.'s already weak financial measures, according to a report published today by Standard & Poor's Ratings Services titled "Credit FAQ: Could Power Outages At Consolidated Edison Dim Its Ratings?"
Higher expenses in the second half due to the costs of emergency response, permanent repairs, customer claims, and potential penalties prompted Con Edison to reduce its earnings guidance to a midpoint of $2.88 per share from a midpoint of $3.00 per share.
"However, after evaluating the financial consequences of the outages, we do not believe that they will affect the company's ratings or outlook," said Standard & Poor's credit analyst Kenneth Farer.
If Con Edison generates sufficient funds from operations (FFO) to achieve and maintain FFO to debt of about 15% and FFO interest coverage above 3.5x by the end of 2008, the ratings could be stabilized. However, a downgrade could occur if these ratios do not appear achievable, which could occur if debt levels increase significantly to fund higher-than-expected outage-related costs, if the 2008 rate agreement is significantly lower than anticipated, or if Con Edison undertakes a higher-risk strategy or increases its leverage.
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