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Investing.com -- Fitch Ratings has affirmed UGI (NYSE:UGI) Utilities, Inc.’s Long-Term Issuer Default Rating at ’A-’ and revised its outlook to stable from negative, reflecting improving results at parent company UGI Corporation.
The ratings agency cited management’s commitment to stabilize operations at affiliate AmeriGas Partners LP without further financial support from the parent company as a key factor in the outlook revision.
UGI Utilities’ ratings reflect its low-risk regulated natural gas and electric distribution operations, solid customer growth, constructive rate regulation, and stable cash flow. These factors help mitigate concerns about the company’s $1.6 billion capital expenditure plan for 2025-2027.
Fitch estimates UGI Utilities’ Funds From Operations leverage will average approximately 4.3x during this period, which aligns with its current rating.
The company’s business profile benefits from a constructive regulatory environment in Pennsylvania, where it has made substantial investments in pipeline modernization. As of the first quarter of 2025, 94% of UGI Utilities’ mains consist of contemporary materials, with cast-iron replacements expected to be completed by 2027.
In January 2025, UGI Utilities filed a rate case requesting a revenue increase of $110 million based on a return on equity of 11.2%. The company reached a settlement agreement on July 9 for a $69.5 million annual base distribution rate increase, pending approval by the Pennsylvania Public Utility Commission.
Fitch views the recent passage of Senate Bill 311 by the Pennsylvania Senate as supportive of UGI Utilities’ growth prospects. The bill, which restricts municipalities from prohibiting specific fuel sources, maintains a fuel-neutral stance that could benefit natural gas as a competitively priced alternative to electricity.
The ratings agency noted that UGI Utilities has a stronger credit profile compared to peers Southwest Gas (NYSE:SWX) Corporation and DTE Gas Company, with more favorable projected financial metrics over the 2025-2027 period.
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