...Predictable Earnings: Ratings on Kentucky Power Co. (KPCO) recognize the predictable nature of regulated utility earnings and the supportive regulatory environment in Kentucky. Regulatory Activity: Fitch Ratings views the regulatory environment in Kentucky as relatively constructive. The $45 million settlement to KPCO's general rate case (GRC) approved in June 2015 is in line with Fitch's expectations. The settlement also includes incremental riders for environmental surcharges, fuel cost adjustments and other items. Improving Credit Metrics: Fitch expects KPCO's credit metrics to improve following the adjudication of its GRC, with adjusted debt/EBITDAR lowering to 3.8x while FFO-adjusted leverage returning close to 4.0x by 2017. These credit metrics compare favorably with Fitch's guideline ratios for utilities rated `BBB¡'. High Proportion of Coal in the Fuel Mix: KPCO's 100% coal mix (about 75% after a planned plant conversion in 2016) leaves the utility exposed to potentially higher...
