Fitch: Capex, Renewable Energy and Bank Liquidity Key to Utility, Power & Gas Sector Outlooks

During the conference, Fitch said that looking ahead to 2010, its credit outlook for the sector is shaped by the expectation of a moderate economic recovery. Electric power demand is expected to turn around from the declines of late 2008 and 2009, but Fitch is expecting growth in demand to be slower than historically, around 1% per annum. In addition, gas prices are expected to reflect an overhang of supply for the next few years, with prices in the $4 to $6 area.

In Fitch's view, capital spending budgets in the electric utility sector have remained high despite well-publicized cuts in some companies' plans. For the entire sector, budgeted capex remains high, in excess of 200% of depreciation and amortization. In addition, the current bank liquidity situation should be manageable and not have a widespread impact on ratings for the UPG sector. Fitch says the UPG sector issuers have maintained relatively good loan and bond market access during the credit crisis. Treasurers in this sector are considering many alternatives to traditional bank credit, and each alternative strategy presents some trade-offs.

Fitch expects rapid growth in renewable energy resources, driven by a combination of tax incentives, renewable portfolio mandates, and growing signs of political pressure to enact feed-in-tariffs. Planned renewable generation coming on line is expected to have a more immediate impact upon the power sector than the implementation of laws or regulations to limit carbon emissions.

Full slide presentations from the event are available on Fitch Ratings' web site 'www.fitchratings.com.' Fitch will publish its full 2010 outlook for the North American power and gas industry later in November.

Additional information is available at 'www.fitchratings.com'.

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