Fitch Ratings has assigned East Tennessee Natural Gas, LLC (ETNG) a first-time Long-term Issuer Default Rating (IDR) and senior unsecured instrument rating of 'A-'. The Rating Outlook is Stable.
The ratings reflect ETNG's long-term take-or-pay contracts with investment-grade counterparties, the demand-pull profile of its customers, high utilization during peak delivery periods, and supportive regulation provided by the U.S. Federal Energy Regulatory Commission (FERC). Fitch expects ETNG's leverage to become strongly positioned for the rating over the forecast period, supported by an expected rate increase and a new growth project. Application of Fitch's parent-subsidiary linkage criteria limits the rating to a one-notch difference with the rating of ETNG's parent, Enbridge Inc. (ENB; BBB+/Stable), but does not constrain it.
Key Rating DriversSupportive FERC Regulation: Fitch views the FERC as among the most supportive regulators in North America. As an interstate pipeline with significant influence over the supply of natural gas into the market it services, ETNG is regulated by the FERC. The cost-of-service framework underlying FERC-regulated tariff rates and the use of long-term take-or-pay contracts provide ETNG the opportunity to earn a reasonable rate of return, if costs are managed prudently. The consistent application of this framework over the pipe's operating life has resulted in economic shipping rates for customers as well stable and predictable financial results for ETNG.
Strong Counterparties: ETNG's customers are mostly utilities, including natural gas local distribution companies (LDCs) and power plants, with some industrial users (chemical company) and natural gas producers as well. Fitch estimates ETNG's weighted average counterparty credit quality is in the strong 'BBB'/weak 'A' range. However, this should improve when the Tennessee Valley Authority (TVA; AA+/Stable) becomes a larger customer (related to the Ridgeline Expansion project) in 2026/2027. The combination of the take-or-pay provisions within ETNG's contracts along with the strong counterparty profile support ETNG's credit quality.
Contract Dynamics: ETNG is insulated from most direct commodity price and volume exposure as the company generates nearly all its revenue from take-or-pay contracts. The weighted average remaining contract life of around seven years is relatively shorter, compared to other highly rated midstream issuers. However, ETNG has longstanding relationships with its top customers, most spanning multiple decades. When combined with high pipeline utilization on peak delivery days and a strong re-contracting track record, Fitch expects the pipe will remain at currently contracted levels throughout the forecast period.
Low Leverage to Return: EBITDA leverage for the three years preceding 2024 was in a range of 1.5x to 2.2x. Fitch calculates 2024 leverage at 5.0x. A debt issuance near year-end was completed, temporarily elevating the metric. Fitch expects a constructive rate case outcome and an on time/on budget expansion project, bringing 2026 EBITDA leverage to about 3.0x, before dropping below 2.0x in 2027. This leverage would be strong for the current rating.
Rate Case and Ridgeline Expansion: ETNG is pursuing new tariff rates to recover capital spent over the past four years and reflect current service costs, including higher debt costs. Fitch expects a constructive outcome from the ongoing rate case, which should increase ETNG's revenue in 2026. The company has begun construction on the Ridgeline Expansion project, which will deliver gas to a TVA power plant that is converting from coal to gas. Fitch expects this expansion to be completed by the end of 2026, driving an additional revenue increase in 2027.
Linkage Considerations: There is a parent subsidiary relationship between ENB and ETNG. Fitch determines ENB's Standalone Credit Profile (SCP) based on consolidated metrics and believes ETNG has a stronger SCP than ENB. Fitch emphasizes ETNG's status as a regulated natural gas pipeline entity in this assessment. Legal ring fencing is porous given the general protections afforded by economic regulation. The access and control factor is open due to ENB's 100% ownership of ETNG. Due to these linkage considerations, Fitch limits the difference between the IDRs of ENB and ETNG to one notch. However, the rating is not currently constrained.
Peer AnalysisETNG's closest peer is Texas Eastern Transmission, LP (TET; A-/Stable). Both are FERC-regulated long-distance natural gas pipeline companies owned by ENB with low leverage. Both are highly contracted pipes which are highly utilized during peak delivery days and have a large percentage of contracts with utility customers. Both have a linkage relationship with the same parent, ENB, which limits the difference between their respective IDRs and the parent to one-notch. Due to similar business and financial profiles, Fitch rates ETNG and TET's IDRs at the same level.
Key Assumptions--Fitch's Oil & Gas Price Deck;
--FERC authorized rates revised during 2025 to reflect capital spent since the last rate case and an updated cost of providing service to shippers;
--Capacity expiring over the forecast period is re-contracted at authorized FERC rates;
--The Ridgeline Expansion project is completed on time and within budget, funded roughly in line with the existing capital structure;
--Interest rates in line with Fitch's Global Economic Outlook.
RATING SENSITIVITIESFactors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
--Negative rating action at ENB;
--EBITDA leverage expected to be above 3.2x on a sustained basis.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
--A positive rating action for ETNG is unlikely, as FERC-regulated natural gas pipeline companies typically have higher peak leverage than would be commensurate with a higher rating.
Liquidity and Debt StructureETNG does not have a credit facility, which is common for FERC-regulated pipelines. Fitch expects ETNG to fund its working capital and maintenance capex mainly from its operating cash flow and have a flexible dividend policy. Available cash (net of cash held back for working capital and other near-term needs) will be distributed up to ENB. Fitch expects ENB to provide ETNG strong support if needed under any financial or operational difficulty. Additionally, Fitch expects ENB to provide the equity required for ETNG's current large expansion project. ENB had ample liquidity for the period ending June 30, 2025.
Issuer ProfileEast Tennessee Natural Gas, LLC owns and operates an interstate FERC-regulated natural gas pipeline system the runs roughly 1,500 miles from Tennessee into Virginia, North Carolina and Georgia. ETNG is an indirect, wholly owned subsidiary of Enbridge Inc.
Date of Relevant Committee 28-Oct-2025 REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. ESG ConsiderationsThe highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
East Tennessee Natural Gas, LLC; Long Term Issuer Default Rating; New Rating; A-; Rating Outlook Stable
----senior unsecured; Long Term Rating; New Rating; A-
Contacts:
Primary Rating Analyst
Michael Ruggirello, CFA
Senior Director
+1 647 933 0261
michael.ruggirello@fitchratings.com
Fitch Ratings Canada, Inc
22 Adelaide Street West Suite 2810
Toronto
Secondary Rating Analyst
Prathamesh Sinha,
Director
+1 647 417 3055
prathamesh.sinha@fitchratings.com
Committee Chairperson
Thomas Brownsword,
Senior Director
+1 646 582 4881
thomas.brownsword@fitchratings.com
MEDIA RELATIONS: Eleis Brennan, New York, Tel: +1 646 582 3666, Email: eleis.brennan@thefitchgroup.com
Additional information is available on www.fitchratings.com
Applicable Model
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
Corporate Monitoring & Forecasting Model (COMFORT Model), v8.2.0 (1)
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