S&P raises PGW bond rating

Standard & Poor's on Tuesday raised its rating on Philadelphia Gas Works bonds, citing improved collections and stable gas prices.

"The upgrade reflects our view of improving trends related to collections, coverage of fixed costs, liquidity, and debt ratios for PGW, as well as the adoption of a number of credit-supportive policies and procedures," said Standard & Poor's credit analyst Jeffrey Panger.

S&P increased its rating to A-minus from BBB-plus on city revenue bonds issued on behalf of PGW under 1975 and 1998 ordinances. The outlook is stable.

The improved rating does not immediately affect PGW's finances, unless it were to issue new bonds or seek to refinance old debt, said Joseph F. Golden Jr., the utility's chief financial officer.

"PGW is proud of the rating upgrade and attributes it to its strong management team," he said.

S&P said that if the city's proposed $1.86 billion sale of PGW to UIL Holdings Corp. is approved - City Council is considering the proposal - the city would defease, or pay off the bonds from sale proceeds.

"Should the sale not move forward, we would not expect additional credit improvement during the next two years, as above-average rates and weak demographics would constrain the ratings," the agency said.

"Meanwhile, if privatization does not proceed, we could lower the rating if financial metrics in the next two years do not approximate levels that management's projections suggest."