Wisconsin Public Service Corp.

The stable rating outlook over the next two years on WPS reflects that on parent WEC Energy Group Inc. (WEC), with our expectation that management will continue to focus on its core utility operations and reach constructive regulatory outcomes to avoid heightened business risk. The outlook also reflects our base-case forecast of adjusted funds from operations (FFO) to debt averaging roughly 16% per year, in line with the current significant financial risk profile. We could lower the ratings if WEC's business risk profile, which we assess as excellent, weakens. We could also lower the ratings if core financial measures consistently underperform our base-case forecast and remain less than credit supportive, including annual adjusted FFO to total debt less than 15%.

...We expect the company to execute on its long-term strategy to decarbonize its generation fleet. Wisconsin Public Service Corp. (WPS) continues to diversify its renewable portfolio with the strategy, most recently with purchase of the Badger Hollow solar farm. We view these facilities as positive for WPS. Its operation mostly in Wisconsin offers modest regulatory jurisdiction diversity. WPS has a customer base of about 435,000 electricity customers and 330,000 natural gas customers. Some 95% of operations are in Wisconsin with the remaining 5% in Michigan, contributing to limited operational diversity. Discretionary cash flow is expected to remain negative. Dividends and capex, including solar and wind farm generation investments, will continue to contribute to DCF deficits, which we expect will be partly debt-funded....

Full Report