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Moody's Investors Service Inc.

Moody's Affirms Trans Bay Cable LLC's Baa2 Rating, Stable Outlook

Strategic Insights

— 2 min read

Moody's Investors Service has affirmed Trans Bay Cable LLC's (TBC) Baa2 long-term Issuer rating, citing its low-risk Federal Energy Regulatory Commission (FERC) regulated electric transmission business and consistently stable financial profile. Despite constraints from its single asset profile and relatively small size, TBC benefits from predictable and stable cash flow generation under the FERC construct, as well as its strategic importance to the San Francisco bay area portion of the California electric grid.

Key Takeaways:

  • Trans Bay Cable LLC's (TBC) Baa2 rating reflects its low-risk FERC regulated electric transmission business and consistently stable financial profile.
  • The rating is constrained by TBC's single asset profile and relatively small size, as well as the substantial amount of debt at its intermediate holding company.
  • TBC benefits from predictable and stable cash flow generation under the FERC construct and its strategic importance to the San Francisco bay area portion of the California electric grid, transmitting 40% of the area's peak power needs.
  • The company maintains a stable financial profile, with a ratio of funds from operations (FFO) to net debt averaging 33% over the 3-year period ending March 2025.
  • TBC's rating is also constrained by its consolidated leverage, including substantial debt at intermediate holding company Transmission Services Holdings LLC.
  • The rating is somewhat mitigated by being part of a large corporate family with a financially strong, higher credit-quality ultimate parent, NextEra Energy, Inc. (Baa1 stable).
  • TBC's distributions to its parent are reflected in the company's ratio of retained cash flow (RCF) or FFO less dividends to net debt, expected to be in the 9-12% range over the next few years.
  • Factors that could lead to an upgrade or downgrade of the rating include differences in FERC regulatory constructs and upstream distribution obligations.

Statistics:

  • TBC's FFO to net debt ratio averaged 33% over the 3-year period ending March 2025.
  • The company's RCF to net debt ratio was 10.2%, on average, over the 3-year period ending March 2025.
  • TBC's rating is five notches lower than the scorecard-indicated outcome of Aa3 due to its small size and single asset risk.
  • Trans Bay Cable LLC owns a 53-mile, 400MW High Voltage Direct Current (HVDC) sub-sea transmission line.
  • The transmission line was completed and placed into commercial operation in November 2010.
  • As of July 2019, NextEra Energy Transmission, LLC acquired the outstanding membership interests of TBC's parent company, Transmission Services Holdings LLC.

Sources:

  • Moody's Investors Service
  • Trans Bay Cable LLC (TBC)
  • Federal Energy Regulatory Commission (FERC)
  • NextEra Energy, Inc. (Baa1 stable)
  • California Public Utilities Commission (CPUC)

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