On Oct. 21, 2009, The United States Court of Federal Claims rendered a decision in favor of Consolidated Edison, Inc. (ED) regarding tax deductions for a 1997 transaction in which an ED subsidiary leased an electric generating facility in the Netherlands and then immediately subleased the facility back to the lessor/sublessee. In Fitch's view, the favorable ruling appears beneficial to ED's financial prospects but has no impact on ED's ratings (Fitch IDR of 'BBB+', with a Stable Outlook).
In its most recent rating action affirming ED's ratings and Outlook on Oct. 5, 2009, Fitch considered two different scenarios as to the outcome of the case and its impact on ED's future cash flows. Fitch's stress forecast assumed that the company would make a payment in 2010 of up to $290 million to resolve the tax dispute; Fitch's base forecast assumed that ED would not be required to make any further payments to the IRS. If the favorable court decision relieves ED of a potential cash outflow, that outcome is consistent with the current rating.
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