Research Update: DPL Inc. And Subsidiary Downgraded To 'BB'; Outlooks Remain Negative

The Public Utilities Commission of Ohio (PUCO) issued an order, effectively invalidating key components of DPL Inc.'s (DPL) electric security plan (ESP), which had included a distribution modernization rider (DMR). We expect this development to have a material impact on DPL's consolidated financial measures, with funds from operations (FFO) to debt declining to about 7.5% beginning in 2020, and debt to EBITDA of more than 7x, warranting a downward revision of DPL's financial risk profile to highly leveraged. In addition, we view this development as indicative of DPL's inability to effectively manage its regulatory strategy. Our previous base case incorporated that the DMR would be extended through 2022. The PUCO decision, in our view indicates a shift to the company's

...- The Public Utilities Commission of Ohio (PUCO) issued an order, effectively invalidating key components of DPL Inc.'s (DPL) electric security plan (ESP), which had included a distribution modernization rider (DMR). - We expect this development to have a material impact on DPL's consolidated financial measures, with funds from operations (FFO) to debt declining to about 7.5% beginning in 2020, and debt to EBITDA of more than 7x, warranting a downward revision of DPL's financial risk profile to highly leveraged. - In addition, we view this development as indicative of DPL's inability to effectively manage its regulatory strategy. Our previous base case incorporated that the DMR would be extended through 2022. The PUCO decision, in our view indicates a shift to the company's regulatory construct, which increases business risk for DPL. We revised downward our assessment of both DPL and its subsidiary, Dayton Power and Light Co. (DP&L)'s business risk profiles to reflect our view of the company's...

Research Update