...MLP Is the New Black: There is a growing trend among utility holding companies (UHCs) to form master limited partnerships (MLPs) for their natural gas-oriented businesses. This report examines credit implications for traditional UHCs that are sponsors and general partners (GP) of MLPs and contribute the initial assets. Fitch Ratings defines a UHC as a holding company that primarily owns and operates regulated investor owned utilities (IOUs). The UHC may also operate unregulated businesses such as merchant generation, energy marketing, and midstream services, including natural gas gathering, processing, transportation and storage. Advantages of Forming an MLP: An MLP provides greater capital access and financial flexibility to UHCs, while allowing them to retain control of assets being dropped down into the MLP. Forming an MLP provides UHCs with an alternative source of financing that could help them deleverage and/or fund growth at lower cost of capital. Credit Concerns of Forming an MLP:...
