Despite higher taxable income and pressure on balance sheets, capital spending by regulated utilities will remain elevated—and much of it will be dedicated to replacing aging infrastructure, hardening or efficiency-boosting measures, and on renewables and environmental projects, said Moody’s Investors Service in a recent sectoral briefing. 

The credit ratings agency for the first time this June downgraded the regulated utility sector from stable to negative, pointing to a surge in financial risks as more individual companies funnel funds to debt. In a Dec. 14 briefing, Moody’s said utilities will claim less in depreciation expenses and have higher taxable income under the 2017 Tax Cuts and Jobs Act, and most are starting to pay cash taxes as early as 2019 or 2020. 

However, several utilities are still involved in extensive improvement projects, it said, warning: “This could put pressure on balance sheets depending on how much debt is used in the financing plans.” 

An Unexpected Surge in Captial Spending 

Capital spending for a group of 31 utility holding companies that the agency examined was expected surge to $ 100 billion in 2018, compared to $ 90 billion in 2017, Moody’s noted.…

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