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October 16, 2012

S&P: Spanish ties could drop CMP credit rating

Economic problems in Spain could have an impact on the credit rating of Central Maine Power, whose parent company, Iberdrola, is based there.

Standard & Poor's Ratings Services reported in a release Monday that the credit rating for CMP is capped at the level of its parent company, which will be under review after a downgrade on the Kingdom of Spain's credit rating to a "BBB-/A-3" level from a "BBB+/A-2" level, with a negative outlook.

If Iberdrola, which derived approximately 47% of its revenue from Spain in 2011, sees a drop as a result, it could impact CMP and the company's other U.S. utilities, including Rochester Gas & Electric Corp. and New York State Electric & Gas, according to the Standard & Poor report.

The S&P announcement says such a downgrade might be avoided if the companies can enact "ring-fencing measures" to insulate the companies from Iberdrola. If they did so, S&P said the ratings could not be impacted by a downgrade of the parent company -- although those measures are not currently in place.

The individual outlook for CMP was more positive, with the report stating that its current "A-2" rating "reflect(s) CMP's low-risk business strategy and excellent business profile and [is] tempered by an aggressive financial position that may come under pressure since the company has begun expanding its transmission system and increased its short-term financing needs."

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