Investing.com -- Moody’s Ratings has affirmed Berkshire Hathaway (NYSE: BRKa ) Energy Company’s (BHE) A3 senior unsecured rating and P-2 commercial paper rating with a stable outlook, affecting approximately $11.5 billion of debt securities.

The credit rating agency cited BHE’s position as one of the largest and most diversified power and utility portfolios in the US as a key factor supporting its credit profile. The company’s ownership by Berkshire Hathaway, Inc. (NYSE:BRK.A), which requires no dividends from BHE, enables it to maintain strong retained cash flow (RCF) to debt ratios of 16% to 17%, among the highest for regulated utility holding companies.

BHE’s diverse energy holdings include the largest gas transport and storage network in the East, integrated utility operations across Western states, the primary transmission network for Alberta, Canada, two distribution network operators in the United Kingdom, and a renewable energy business with long-term contracts.

The company’s RCF to debt ratios were 15.3% in 2023 and 15.9% in 2024 on a fully-adjusted basis, slightly below Moody’s downgrade guideline of 16%. Cash flow was negatively affected by large energy deferrals in 2023, higher wildfire mitigation costs at its PacifiCorp subsidiary, and a lawsuit settlement related to its realty business in 2024.

On Tuesday, Moody’s downgraded PacifiCorp to Baa2 from Baa1 following the Utah Public Service Commission’s decision to deny the company’s petition to reconsider a rate case decision. Despite this, Moody’s noted the downgrade did not materially impact BHE’s overall credit profile given its size, scale and diversity.

The stable outlook reflects BHE’s steady cash flow, low business risk of its diverse regulated operations, and its financial strategy. Moody’s expects the company to maintain an RCF to debt ratio in the 16% to 17% range and parent debt as a percentage of consolidated debt in the 20% to 30% range.

An upgrade could occur if RCF to debt is sustained above 20%, while a downgrade might result if this ratio remains below 16%, if regulatory issues arise in multiple jurisdictions, if investments are financed with excessive leverage, or if PacifiCorp’s wildfire liabilities worsen significantly.

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