...Stabilizing Credit Metrics: Kentucky Power Co.'s (KPCO) metrics returned to normal in 2016 following poor results related to one-time fuel-cost fees associated with the Mitchel power plant in 2015. KPCO was able to improve EBITDA generation substantially in 2016 (20% increase from 2015) as the full year effect of the cost recovery mechanisms decided in the 2015 rate case were realized. Fitch Ratings expects debt/EBITDAR to trend closer to 3.7x¡3.9x from 2017¡2019. The base case assumes earned ROE will return closer to the industry average following the results of the recently filed rate case decision. Constructive Regulatory Environment: The regulatory environment in Kentucky is generally supportive of credit quality, in Fitch's opinion, as evidenced by the balanced settlement to KPCO's general rate case (GRC) authorized in June 2015. While the GRC resulted in a base rate decline, the settlement included incremental riders for environmental surcharges, fuel cost adjustments and various...
