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Nantucket Electric Company -- Moody's downgrades National Grid plc and most subsidiaries; outlook stable

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Rating Action: Moody's downgrades National Grid plc and most subsidiaries; outlook stableGlobal Credit Research - 02 Mar 2021London, 02 March 2021 -- Moody's Investors Service, (Moody's) has today downgraded to Baa2 from Baa1 the issuer and senior unsecured ratings on National Grid plc, the ultimate holding company of the National Grid group. Moody's has also downgraded to Baa2 from Baa1 the issuer ratings of the group's US intermediate holding companies, National Grid North America Inc. (NGNA) and National Grid USA (NG USA). In all cases, the outlook has been changed to stable from negative.Concurrently, Moody's has downgraded to Baa1 from A3 the ratings of all the group's operating subsidiaries in the UK, with the transmission networks accounting for the vast majority of the group's UK earnings and regulated assets, and the group's operating subsidiaries in the US that provide distribution activities, either solely or primarily, in service territories outside of New York. The affected entities are: National Grid Electricity Transmission plc (NGET); National Grid Gas plc (NGG); National Grid Electricity System Operator Limited (NG ESO); Boston Gas Company (Boston Gas), Massachusetts Electric Company (MECO) and Narragansett Electric Company (NECO). For all these entities, the outlook has been changed to stable from negative.Moody's has affirmed the A3 issuer and senior unsecured ratings of New England Power Company (NEP), which carries out electricity transmission activities in the US, and maintained the stable outlook.Moody's has changed the outlook to negative from stable on The Brooklyn Union Gas Company (KEDNY), one of the group's two gas local distribution companies operating in downstate New York, and affirmed KEDNY's Baa1 issuer and senior unsecured ratings. No rating action was taken on the group's two other New York subsidiaries, KeySpan Gas East Corporation (KEDLI) and Niagara Mohawk Power Corporation (NiMo), which are both on negative outlook.Moody's has also taken related rating actions on (1) wholly owned finance subsidiaries of the group, NGG Finance plc and British Transco International Finance B.V.; (2) debt of another subsidiary, Nantucket Electric, which is guaranteed by MECO; and (3) debt assumed by NG USA (originally issued by KeySpan Corporation) and Boston Gas (originally issued by Colonial Gas Company); and (4) National Grid Generation LLC's (Genco's) ratings.Moody's has affirmed Prime-2 short-term ratings for National Grid plc, NGNA, NG USA, NGET and NGG.A full list of affected ratings appears toward the end of this press release.RATINGS RATIONALENATIONAL GRID PLC -- DOWNGRADE AND STABLE OUTLOOKThe downgrade of National Grid plc's issuer and senior unsecured ratings to Baa2 from Baa1 reflects Moody's expectation that the group will not maintain a financial profile in line with the rating agency's minimum guidance for the Baa1 rating level over at least the next 2-3 years under the group's strategy and updated financial policy.On 2 March, National Grid announced it will continue to (1) undertake a sizeable investment programme in the UK, though Moody's expects investment levels to remain below those in the US, and has previously guided to average growth in the group's regulated assets of 5-7% per annum over the medium term; and (2) maintain material shareholder distributions by continuing to grow the dividend at least in line with (CPIH) inflation over the medium term. Both factors, coupled with substantial debt at various holding companies and US tax reform, have depressed cash flow metrics in recent years with the group exhibiting Retained Cash Flow (RCF) to Net Debt just above 9% in fiscal years ending March 2019 and March 2020.Moody's expects pressure on operational cash flows to intensify over the next few years as (1) tough multi-year regulatory determinations take effect for the vast majority of the group's regulated assets over the next 12 months; and (2) the impact of the coronavirus pandemic fall through - greater regulatory scrutiny of the impact on consumers of rate case proposals and the potential for lower allowed returns from the fall in risk-free rates.For the group's UK transmission businesses, around half of the group's regulated assets, cash allowed equity returns will be 35-40% lower in the forthcoming price control (RIIO-T2, which commences on 1 April), averaging c. 4.3% (at 60% gearing) compared to 6.8-7.0% in the current control. In addition, the companies will be able to keep a lower proportion of any outperformance of regulatory cost allowances, material for NGET in the current price control.Moody's notes National Grid has lodged an appeal on behalf of its UK transmission businesses on the regulator's cut in allowed equity returns for a RIIO-T2, with a decision by the appeal body (Competition and Markets Authority, CMA) expected no later than November. However, based on recent UK regulatory determinations and the CMA's updated thinking for outstanding appeals in the UK water sector, Moody's considers there is limited potential upside, if any, beyond the 25 basis point reduction in allowed equity returns from assumed outperformance -- the regulator's most controversial proposal. The removal of this downward adjustment would result in a GBP20-25 million annual increase in allowed revenue but this (1) represents less than 0.1% of the group's net debt, over GBP30 billion at September 2020; (2) is almost equivalent to the reduction in allowed revenues across for the businesses for the perceived poor quality of the regulatory submission.Over half of the group's US rate base pertains to its New York operations, one of the regions worst affected by the coronavirus pandemic. National Grid is currently in rate case settlement discussions for all three of its New York businesses. However, the delay in securing updated rates in downstate New York is already acting as a drag on these businesses' metrics, though there is a make-whole provision for the shortfall once a settlement is agreed. Moody's believes these delays are reflective of an operating environment for the state's utilities, particularly for gas local distribution companies (all of KEDLI and KEDNY's operations and part of NiMo's), that has become materially more challenging since National Grid made its filings for KEDLI and KEDNY in April 2019.The state regulator (the Public Service Commission, PSC) continued to cut allowed returns in determinations made in 2020 (to authorised return on equity [ROE] of 8.8% whilst retaining a 48% equity layer); and appears to have placed greater emphasis on affordability, with extensive coronavirus-related provisions included in rulings made since the pandemic hit the state, including back-loading of rate increases.At the same time, political rhetoric and actions taken towards various state utilities have increased. New York State Governor Andrew Cuomo has formally threatened to revoke several utility operating licenses, including KEDLI's and KEDNY's (though this threat related to a service moratorium on new gas connections was subsequently rescinded following a solution being reached), and in November 2020 published a bill (republished in February 2021) outlining a formal process for doing so, with more severe penalties for underperformance. The PSC has also published a proposal in February 2021 for overhauling gas planning arrangements to limit the growth of new gas infrastructure.The stable outlook reflects Moody's expectation that National Grid's key metrics will recover from the lows of FY2021, expected to be RCF/Net Debt of 6-7% when the pandemic significantly depresses them, and will then remain materially above 7% from FY2023 onwards, but excluding timing differences will not be materially above 9% over the next few years. The group has only timing exposure to the under-recovery of allowed revenue in FY2021 due to revenue decoupling for all its regulated businesses, with the shortfall recouped for its UK businesses in FY2023. For additional covid-related costs, more significant in the US where the retail activities of the distribution utilities mean bad debts will be above regulatory allowances, the extent and timeliness of cost recovery remain uncertain, with state-wide proceedings most advanced in Massachusetts.NGNA, NG USA AND GENCO-- DOWNGRADE AND STABLE OUTLOOKThe downgrade of NGNA's and NG USA's issuer ratings to Baa2 from Baa1 primarily reflects the downgrade of National Grid plc, given the significant movement of funds between the group's holding companies. It also reflects the persistent weakness of key credit metrics for both entities with cash flow from operations pre-working capital (CFO pre-WC) / debt in the low double digits in percentage terms, below our Baa1 guidance of 15%.The metrics of these two intermediate holding companies, with NGNA sitting above NG USA, are a function of the consolidated credit quality of the group's US operating subsidiaries and the level of holding company debt. NGNA's cash flow metrics have improved in recent years, albeit from very low levels, largely driven by National Grid plc injecting $5.5 billion of equity since June 2017, over 25% of NGNA's debt at March 2020. Moody's estimates this has reduced HoldCo debt at either NGNA or NG USA from around 48% of the consolidated US group's debt at March 2017 to around 30% at March 2021. These equity injections have not been passed down to NG USA, whose annual dividends of c. $0.6 billion per annum in recent years, have allowed NGNA to repay intercompany notes (for acquisition debt) to affiliates of National Grid plc. Moody's considers the level of HoldCo debt, with any new external debt only raised at NGNA rather than NG USA, will be significantly influenced by the overall requirements of the National Grid Group..We assess the consolidated credit quality of the group's US operating subsidiaries in aggregate as commensurate with a weak A3/strong Baa1 rating. As with other US utilities, US tax reform has depressed operating cash flows but the challenging operating environment in New York has had a larger impact on National Grid than some other groups. The ratings are supported by the low business risk associated with electricity transmission and electricity and gas distribution, as well as the group's diversification across four transparent and largely supportive regulatory regimes.Given the level of support that the National Grid group has provided to NGNA in recent years, the stable outlook on NG USA and NGNA is tied to that on National Grid plc.The downgrade and the outlook change to stable of Genco is linked to the rating action on its parent companies, NGNA and NG USA, because Moody's assessment is that Genco's weaker underlying credit quality is offset by the high likelihood that its parent companies would provide support if it were to become necessary.In addition to the likelihood of support from its parent companies, Genco's Baa2 issuer rating reflects the company's good cash flow visibility under a Power Supply Agreement (PSA) with the Long Island Power Authority (LIPA) that covers substantially all of the company's output and provides for a pass-through of fuel, tax and certain other costs. Genco's rating is constrained by its reliance on a single customer, the age and low utilisation of its assets and its small scale. Given the unfavourable policy environment and market conditions for fossil fuel generation in New York state, Moody's regards it as likely that the PSA will be terminated or renegotiated on potentially less favorable terms in 2025 or allowed to lapse in 2028.NGET, NGG AND NG ESO -- DOWNGRADE AND STABLE OUTLOOKThe downgrade of NGET's and NGG's senior unsecured ratings to Baa1 from A3 is driven by the downgrade of the consolidated credit quality of the National Grid group. On a standalone basis, key financial metrics for each entity are consistent with a higher rating (weak A2/strong A3) but Moody's does not allow ratings for these transmission companies to exceed the rating agency's assessment of the group's consolidated credit quality at the Baa1 rating level. Regulatory restrictions and ring-fencing provisions that apply in their license do not provide sufficient credit insulation to de-link the ratings at this level.Despite a tough regulatory determination for the forthcoming RIIO-T2 price controls and a likely reduction in operating cash flows from April 2021, Moody's expects that both companies will maintain significant headroom to minimum adjusted interest coverage ratios (AICR) for the Baa1 rating of at least 1.4x. This reflects their solid financial profile with relatively low leverage and borrowing costs, compared to both regulatory assumptions and other energy networks in Great Britain. NGG's AICR metrics will be supported by the continuing receipt of early termination payments from energy suppliers for the replacement of NGG's domestic gas meters with smart meters given the roll-out now appears unlikely to be completed before 2025.The downgrade of NG ESO to Baa1 from A3 is also tied to the downgrade of National Grid plc. From 1 April, and the start of a new two-year regulatory period, NG ESO will benefit from greater cash flow predictability, with the removal of exposure to new timing differences on network charges -- likely to be almost GBP80 million in FY2021, around 35% of regulated asset value (RAV), which will be recovered in FY2023. Whilst NG ESO has adequate liquidity, Moody's believes the size and terms of its existing Revolving Credit Facility benefits from its ownership by the National Grid group.The stable outlook on all three entities is tied to that on National Grid plc.BOSTON GAS, MECO and NECO -- DOWNGRADE AND STABLE OUTLOOKThe downgrade of Boston Gas, MECO and NECO reflects the deterioration in Moody's downgrade of the consolidated credit quality of the National Grid group which currently acts as a cap on their ratings. Moody's considers on a standalone basis that MECO and NECO will meet minimum guidance for an A3 rating (CFO pre-WC/debt at least in the high teens in percentage terms).The cap reflects the substantial additional debt at the parent holding companies, NG USA and NGNA, and the absence of significant ring-fencing provisions. The dividend lock-up for Boston Gas, MECO and NECO only applies if their debt to capitalization will exceed 70% - a level much higher than for the group's New York utilities (in the mid-50s in percentage terms). Although National Grid manages its financing and liquidity on a group basis, Moody's considers the linkages for its US subsidiaries to be greater than for its UK subsidiaries. None of the group's US subsidiaries have revolving credit facilities in their own names. Short-term liquidity requirements are managed via the group's regulated money pool.NECO's ratings are supported by the diversification of its revenues between distribution and transmission, its stable and predictable cash flows, and the generally supportive regulatory environment in Rhode Island.MECO's ratings benefit from the low business risk of electricity distribution and a regulatory environment in Massachusetts that has become more supportive in recent years, evidenced in MECO's performance-based rate plan approved in 2019 under which the company earnt an ROE of 10.3% in FY2020. MECO has increased cash flow visibility for a further 3.5 years under the primary term of this rate plan. The downgrade of the notes issued by Nantucket Electric Company reflect that MECO guarantees this debt.Boston Gas's ratings are supported by the low business risk of gas distribution and supportive regulatory environment in Massachusetts. Moody's expects additional credit supportive provisions to be included in these businesses next rate plan (Boston Gas comprises Boston Gas and its smaller sister company Colonial Gas Company following a merger in 2020), in particular a performance-based rate plan similar to MECO's. National Grid filed for new rates in November 2020 with a decision expected in late September 2021.NEP -- AFFIRMATION AND MAINTENANCE OF STABLE OUTLOOKAffirmation of NEP's A3 issuer rating reflects Moody's expectation that NEP will continue to have the strongest financial profile of the group's US subsidiaries and maintain Funds From Operation (FFO) to Net Debt at least in the mid twenties in percentage terms, well above minimum guidance for the assigned rating. Moody's expects that NEP's cash flows will continue to benefit from (1) authorized returns (10.57% currently) significantly above the group's other state regulated utilities and earning these returns on the on a much larger proportion of its regulatory capital structure (66% compared to around 50%); and (2) achieving an ROE slightly above authorized levels through performance on incentive adders. It is the persistence of a much stronger financial profile that means NEP's ratings can pierce the consolidate credit quality of the group despite the absence of significant ring-fencing provisions, with dividend lock-up arrangements identical to those for MECO and NECO.NEP's A3 rating also benefits from the very low business risk of electricity transmission, the Federal Energy Regulatory Commission's well-established and transparent regulatory framework, and a tariff formula that allows for the timely recovery of operating and capital spending.KEDNY -- NEGATIVE OUTLOOK AND AFFIRMATIONMoody's decision to change the outlook to negative on KEDNY reflects (1) the deterioration in the credit quality of the consolidated National Grid group because KEDNY's rating is currently supported by its membership of National Grid group; and (2) uncertainty that it will meet minimum guidance for the Baa1 rating of CFO pre-WC / debt of 15% given the protracted settlement discussions in New York.Affirmation of the Baa1 senior unsecured ratings of KEDNY reflects the low business risk of gas distribution, and the transparent and established regulatory framework in New York State, which historically provided generally stable and predictable cash flow.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSAlthough not currently anticipated under the company's strategy and updated financial policy, upward pressure on the ratings of National Grid plc and NGG Finance plc would develop if RCF / Net Debt appeared likely to be comfortably and sustainably, i.e. excluding the impact of timing differences, above 9%. The ratings could be downgraded if RCF/Net Debt appeared likely to persistently fall short of 7%. Moody's notes these minimum thresholds may be tightened if (1) the challenging operating environment in the New York is reflected in forthcoming regulatory determination in the state; or (2) there is faster than expected shift in the group's earnings towards the US because Moody's views these as being of lower quality than those from UK transmission.Because the ratings of NGNA and NG USA are now tied to those of National Grid plc, neither upward or downward rating pressure is currently anticipated. Given NGNA and NG USA are intermediate holding companies, Moody's considers their rating to be capped at the level of National Grid plc, the ultimate holding company of the group. Upward rating pressure on Genco's rating is not expected given Moody's assessment that its standalone credit quality is weaker than that of NGNA and NG USA. Downward rating pressure would arise if LIPA terminated early the Power Supply Agreement (PSA) and Genco did not provide a clear plan to retire outstanding debt.Upward rating pressure on NGET, NGG, NG ESO, Boston Gas, MECO and NECO is not currently expected because in all cases this would require an upgrade of the consolidated credit quality of the group unless Moody's changed its approach to allow ratings to pierce those of the group. Moody's expects on a standalone basis, NGET and NGG would comfortably meet minimum guidance for an upgrade to A3 of AICR above 1.6x and Net Debt / RAV below 68%. On a standalone basis, Boston Gas, MECO and NECO would need to meet CFO pre-WC/debt at least in the high teens in percentage terms for an upgrade to A3.Moody's notes with the growing shift in regulated assets and earnings in the US, the consolidated credit quality of the group may act as less of a cap on the ratings of UK and US operating subsidiaries going forward. This reflects that National Grid's operating subsidiaries are typically geared at or very close to regulatory determinations, particularly in the US, and we expect this will continue given that the regulatory frameworks contain disincentives for gearing substantially above these levels (tax clawback mechanisms in the UK; likely reductions in equity layer in future rate case authorisations in the US). Given that the group's sizeable investment programme in the US acts as a drain on free cash flow which, in turn, reduces distribution capacity if regulatory gearing assumptions are to be maintained, Moody's expects that the group's UK businesses will continue to be the larger provider of distributions up to the parent.Upward rating pressure on NEP is not currently expected given that it would require an upgrade of the consolidated credit quality of the group.The outlook on KEDNY could be stabilized if, following publication of the joint proposal for its forthcoming rate plan, the company were expected to exhibit CFO pre-WC / debt of at least 15% on average over the primary term. Downward rating pressure would occur if either (1) KEDNY were not expected to achieve this; (2) KEDNY did not secure a multi-year rate case settlement; or (3) there were further adverse political developments that impacted the regulatory framework.The principal methodology used in rating Boston Gas Company, Colonial Gas Company, KeySpan Corporation, Nantucket Electric Company, Massachusetts Electric Company, Narragansett Electric Company, National Grid Electricity System Operator Ltd, National Grid North America Inc., National Grid USA, NGG Finance plc, Brooklyn Union Gas Company, The, and National Grid plc was Regulated Electric and Gas Utilities published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1072530. The principal methodology used in rating National Grid Electricity Transmission plc, National Grid Gas plc, British Transco International Finance B.V., and New England Power Company was Regulated Electric and Gas Networks published in March 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1059225. The principal methodology used in rating National Grid Generation LLC was Unregulated Utilities and Unregulated Power Companies published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1066389. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. The National Grid group owns a range of largely regulated businesses focusing on the electricity and gas transmission networks in the UK and transmission and distribution utilities in the US. The company reported total revenue of GBP14.5 billion in 2019-20 and total regulated and other assets of GBP45.2 billion as of 31 March 2020. In the UK, National Grid Electricity Transmission plc owns the high-voltage electricity transmission network in England and Wales and National Grid Electricity System Operator Ltd operates the system across Great Britain. National Grid Gas plc owns and operates the high pressure gas transmission system in Britain. In the US, via subsidiaries of National Grid North America Inc., National Grid distributes electricity to 3.4 million customers in Massachusetts, Rhode Island and upstate New York and gas to 3.6 million customers in upstate New York, New York City, Long Island, Massachusetts and Rhode Island. National Grid also has a number of related businesses that operate outside of traditional regulatory price controls, such as electricity generation, liquefied natural gas importation and storage, interconnectors, property and metering.LIST OF AFFECTED RATINGS..Issuer: Boston Gas Company.... Long-term Issuer Rating (Local Currency), Downgraded to Baa1 from A3....Long-term Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to Baa1 from A3....Outlook, Changed To Stable From Negative..Issuer: Colonial Gas Company....Long-term Senior Secured First Mortgage Bonds (Local Currency), Downgraded to A2 from A1 (Assumed by Boston Gas Company)....Long-term Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to Baa1 from A3 (Assumed by Boston Gas Company)..Issuer: KeySpan Corporation....Long-term Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to Baa2 from Baa1 (Assumed by National Grid USA)..Issuer: Nantucket Electric Company....Long-term Senior Unsecured Revenue Bonds (Local Currency), Downgraded to Baa1 from A3..Issuer: Massachusetts Electric Company.... Long-term Issuer Rating, Downgraded to Baa1 from A3....Long-term Pref. Stock Preferred Stock (Local Currency), Downgraded to Baa3 from Baa2....Long-term Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to Baa1 from A3....Outlook, Changed To Stable From Negative..Issuer: Narragansett Electric Company.... Long-term Issuer Rating, Downgraded to Baa1 from A3....Long-term Pref. Stock Preferred Stock (Local Currency), Downgraded to Baa3 from Baa2....Long-term Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to Baa1 from A3....Outlook, Changed To Stable From NegativeIssuer: National Grid Electricity System Operator Ltd.... Long-term Issuer Rating (Local Currency), Downgraded to Baa1 from A3....Outlook, Changed To Stable From Negative..Issuer: National Grid North America Inc..... Long-term Issuer Rating (Local Currency), Downgraded to Baa2 from Baa1....Short-term Issuer Rating (Local Currency), Affirmed P-2....Long-term Senior Unsecured Medium-Term Note Program (Foreign Currency), Downgraded to (P)Baa2 from (P)Baa1....Long-term Senior Unsecured Regular Bond/Debenture (Local and Foreign Currency), Downgraded to Baa2 from Baa1.... Commercial Paper (Local and Foreign Currency), Affirmed P-2....Outlook, Changed To Stable From Negative..Issuer: National Grid USA.... Long-term Issuer Rating (Local Currency), Downgraded to Baa2 from Baa1.... Commercial Paper (Local Currency), Affirmed P-2....Outlook, Changed To Stable From Negative..Issuer: NGG Finance plc....Backed Senior Subordinated Regular Bond/Debenture (Local and Foreign Currency), Downgraded to Ba1 from Baa3....Outlook, Changed To Stable From Negative..Issuer: Brooklyn Union Gas Company, The.... Long-term Issuer Rating (Local Currency), Affirmed Baa1....Long-term Senior Unsecured Regular Bond/Debenture (Local Currency), Affirmed Baa1....Outlook, Changed To Negative From Stable..Issuer: National Grid plc.... Long-term Issuer Rating, Downgraded to Baa2 from Baa1.... Long-term Senior Unsecured Medium-Term Note Program (Foreign Currency), Downgraded to (P)Baa2 from (P)Baa1....Long-term Senior Unsecured Regular Bond/Debenture (Local and Foreign Currency), Downgraded to Baa2 from Baa1....Long-term Senior Unsecured Shelf (Foreign Currency), Downgraded to (P)Baa2 from (P)Baa1.... Commercial Paper (Foreign Currency), Affirmed P-2....Other Short Term Medium-Term Note Program (Foreign Currency), Affirmed (P)P-2....Outlook, Changed To Stable From Negative..Issuer: National Grid Electricity Transmission plc....Long-term Senior Unsecured Medium-Term Note Program (Foreign Currency), Downgraded to (P)Baa1 from (P)A3....Long-term Senior Unsecured Regular Bond/Debenture (Local and Foreign Currency), Downgraded to Baa1 from A3.... Commercial Paper (Foreign Currency), Affirmed P-2....Other Short Term Medium-Term Note Program (Foreign Currency), Affirmed (P)P-2....Outlook, Changed To Stable From Negative..Issuer: National Grid Gas plc....Long-term Senior Unsecured Medium-Term Note Program (Foreign Currency), Downgraded to (P)Baa1 from (P)A3....Long-term Senior Unsecured Regular Bond/Debenture (Local and Foreign Currency), Downgraded to Baa1 from A3....Backed Long-term Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to Baa1 from A3....Other Short Term Medium-Term Note Program (Foreign Currency), Affirmed (P)P-2....Commercial Paper (Foreign Currency), Affirmed P-2....Outlook, Changed To Stable From Negative..Issuer: British Transco International Finance B.V..... Backed Long-term Senior Unsecured Regular Bond/Debenture (Foreign Currency), Downgraded to Baa1 from A3....Outlook, Changed To Stable From Negative..Issuer: New England Power Company....Long-term Issuer Rating, Affirmed A3....Long-term Pref. Stock Preferred Stock (Local Currency), Affirmed Baa2....Long-term Senior Unsecured Regular Bond/Debenture (Local Currency), Affirmed A3....Outlook, Remains Stable..Issuer: National Grid Generation LLC....Long-term Issuer Rating, Downgraded to Baa2 from Baa1....Outlook, Changed To Stable From NegativeREGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU 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. Philip Cope Asst Vice President - Analyst Infrastructure Finance Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Douglas Segars, CFA MD - Infrastructure Finance Infrastructure Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. 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