Change expected after announcement of sale

HELENA - Two major bond rating agencies have posted alerts on Montana Power Co.'s ratings, but a utility executive said Friday it was expected after the company announced this week it was selling off its energy properties.

Montana Power announced Tuesday it hoped to sell its remaining energy and utility properties in six to 12 months and would keep its highly successful Touch America telecommunications subsidiary. The company would assume the name of Touch America and drop its longtime name of Montana Power.

On Thursday, Standard & Poor's put the "credit watch with developing" implications on the ratings on Montana Power and its subsidiary, Entech Inc. That means that the ratings could be raised, lowered or affirmed, depending on what happens next.

Standard & Poor's said in a press release that its credit watch "reflects uncertainty over the strategic objectives, financial policy and financial and business profiles for the surviving entity." Once these uncertainties are discussed with corporate executives, Standard & Poor's said it will provide "an ultimate ratings determination."

Meanwhile, another bond ratings agency, Fitch IBCA, on Friday likewise tagged Montana Power with a "rating alert evolving" to reflect the company's changing status. Fitch IBCA said it intends to provide a final ratings determination once Montana Power's management provides a "clearer picture of its strategy."

Bond-rating agencies assign grades to corporate and municipal debt securities, based on the borrowers' ability to repay the debt. The higher the rating, the lower the interest the borrower must pay to borrow money. Conversely, the lower the rating, the higher the interest rate it costs to borrow money.

In response, Montana Power Co. Vice Chairman Jerry Pederson said the rating notices were not unexpected.

"It doesn't really mean anything right now because we're not issuing any debt," said Pederson, who also is the company's chief financial officer. "All they're saying is we're going through a major change, and as bond investors, you ought be aware of that. We would want our bond investors to be aware,"

Pederson said he's not alarmed by the rating developments and hopes no one else is either.

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