Rating Action: Moody’s changes United Illuminating’s outlook to positive; affirms Central Maine Power’s ratings with stable outlookGlobal Credit Research – 01 Feb 2022New York, February 01, 2022 — Moody’s Investors Service (“Moody’s”) today affirmed the ratings of United Illuminating Company (UI), including its long-term Issuer rating of Baa1, and Central Maine Power Company (CMP), including its senior unsecured rating of A2. Both utilities are subsidiaries of Avangrid, Inc. (Baa2 stable). See a complete list of all affected debt near the end of this press release.The outlook for UI was changed to positive from stable. Despite Connecticut’s recent political and regulatory challenges, the company 1) was able to reach a constructive rate settlement agreement in June 2021, 2) continues to benefit from credit supportive federal regulation of its transmission rate base and 3) should generate a ratio of CFO pre-WC to debt of 20% over the next two years — a level which is consistent with A3-rated peer ratios.The outlook for CMP remains stable, which reflects a credit profile that is primarily supported by the strong electric transmission cost recovery provisions allowed by the Federal Energy Regulatory Commission (FERC), but also tempered by challenged regulatory relationships in Maine, where CMP operates state-regulated electric distribution assets.RATINGS RATIONALEUI’s credit benefits from its low-risk asset profile, various cost recovery provisions that will persist outside of, and mitigate the impact of, a two-year distribution base rate freeze and a sustainable CFO pre-WC to debt ratio of 20%. The company’s credit profile is challenged by recent legislative intervention into utility rate making that could have uncertain long-term effects on the rate framework in Connecticut (e.g., a change to performance-based rates).A significant degree of political intervention and unpredictable regulatory behavior developed in Connecticut following Tropical Storm Isaias in August 2020; however, the supportive cost recovery features of the regulatory framework (e.g., forward test year, full revenue decoupling, an infrastructure rider mechanism, a 50% equity layer and 9.10% allowed ROE) were preserved in UI’s June 2021 rate settlement agreement, approved by the Public Utility Regulatory Authority (PURA, which oversees roughly 65% of UI’s rate base).As such, we view the order as generally constructive since it included various stakeholders, was settled during a contentious period, and successfully dealt with about $45 million of credits due to customers from 2017’s federal tax reform.While we still view Connecticut as carrying some legislative and regulatory uncertainty, roughly 35% of UI’s rate base is subject to FERC regulation, which remains among the most supportive regulatory regimes in the US and will continue to offer timely annual recovery of the company’s transmission costs. Importantly, FERC transmission investments are also financed with a higher equity content and are allowed higher returns than those offered in most US states. We estimate that this will help UI’s consolidated financial profile remain consistent with A3-rated peers (i.e., 20% average CFO pre-WC to debt since 2019) amid a distribution base rate freeze through May 2023.CMP’s credit is underpinned by the roughly 60% of its rate base that is subject to FERC regulation, which allows the company to earn high, double-digit, returns under formulaic and annual cost recovery. CMP’s remaining rate base is comprised of distribution assets in the state of Maine, which also has a good cost recovery framework, but where the company is still working to improve relationships with both customers and regulators.Similar to UI, CMP experienced state regulatory challenges in 2020, due to customer service concerns, which resulted in an ROE penalty in its February 2020 general rate case decision. Since then, CMP has operated according to the Maine Public Service Commission’s prescribed standards and is seeking to restore its allowed ROE to the pre-penalty level of 9.25% from 8.25% currently. We presume that constructive regulatory relationships will be restored in the future and that the company’s distribution business will be able to earn its allowed returns and generate cash flow to debt metrics near 20%.Despite the challenges in Maine, CMP’s majority transmission rate base and high returns on that business (e.g., a midpoint of about 11.5% across its assets) will keep consolidated financial metrics in-tact, including our expectation for consolidated FFO to net debt ratios to hover in the low-20% range over the next three years.OutlooksUI’s positive outlook incorporates our view that the company will consistently generate a ratio of CFO pre-WC to debt around 20% over the next three years and that timely cost recovery (e.g., multi-year rate plans, forward test years, infrastructure improvement and decoupling mechanisms) will persist in Connecticut, which could lead to a stronger overall credit profile.CMP’s stable outlook is based on the timely cost recovery and transparent rate making offered by the FERC, our expectation for improved stakeholder relationships in Maine and a consolidated ratio of FFO to net debt around 22% going forward that should maintain its current credit quality.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSFactors that could lead to an upgradeUI could be upgraded if the company continues to produce a ratio of CFO pre-WC to debt at or above 20% under its new rate plan, or if there is a material improvement in the cost recovery mechanisms in Connecticut.CMP could be upgraded with a material increase in the supportiveness of its state regulator, a sizeable increase in its exposure to FERC regulation and if the company generates a sustainable FFO to net debt ratio of 25%.Factors that could lead to a downgradeUI could be downgraded if the Connecticut legislative or regulatory environment deteriorates, or cost recovery becomes less timely. The company could also experience negative rating pressure if its ratio of CFO pre-WC to debt drops below 17% for a sustained period.CMP could be downgraded if there is a prolonged deterioration in the credit supportiveness of its regulatory and stakeholder relationships, or if FFO to net debt ratios fall to 18% on a consistent basis.Despite certain ring-fencing provisions in place at each utility, UI and CMP could also be downgraded if the ratings of either of its parent companies, ultimate parent Iberdrola S.A. (Baa1 stable) or immediate parent Avangrid, Inc., fall materially.Affirmations:..Issuer: Central Maine Power Company…. Issuer Rating, Affirmed A2….Pref. Stock Preferred Stock, Affirmed Baa1….Senior Unsecured Regular Bond/Debenture, Affirmed A2..Issuer: United Illuminating Company…. Issuer Rating, Affirmed Baa1..Issuer: NEW HAMPSHIRE (STATE OF) BUSINESS FINANCE AUTH…..Senior Unsecured Revenue Bonds, Affirmed Baa1….Gtd Senior Unsecured Revenue Bonds, Affirmed Baa1….Underlying Senior Unsecured Revenue Bonds, Affirmed Baa1Outlook Actions:..Issuer: Central Maine Power Company….Outlook, Remains Stable..Issuer: United Illuminating Company….Outlook, Changed To Postive From Stable The methodologies used in these ratings were Regulated Electric and Gas Utilities published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1072530, and Regulated Electric and Gas Networks published in March 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1059225. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. 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Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Ryan Wobbrock VP – Senior Credit Officer Infrastructure Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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