...Regulated Low-Risk Business Profile: Kentucky Power Co. (KPCO) is an integrated electric utility in eastern Kentucky. The regulatory environment in Kentucky supports KPCO's business model and provides for cost-of-service recovery and a decent return on invested capital. There is a modest rating linkage to KPCO's Issuer Default Rating (IDR) and American Electric Power Company, Inc.'s (AEP, BBB/Stable) credit profile, in Fitch's opinion. Improving Credit Metrics: Fitch Ratings expects KPCO's credit metrics to improve with the recovery of nonfuel costs related to its ownership in the Mitchell Power Plant. Kentucky regulators have approved a $44 million annual cost rider for 17 months beginning January 2014. Fitch expects KPCO's leverage (adjusted debt/FFO) to approximate 4.00x by 2016, and the fixed-charge coverage ratio (FFO/fixed charge) is expected to be around 3.70x by 2016. EBITDAR-based leverage is expected to decline to around 3.5x by the end of 2016. Short on Capacity: KPCO will face...
