Investment Grade

On Thursday, July 9, S&P downgraded Oracle's credit rating from BBB to BBB-, indicating a heightened risk of default. This downgrade comes as OpenAI is identified as a significant credit risk within Oracle's $638 billion backlog, and the company is projected to have a free operating cash flow deficit of approximately $42 billion in fiscal 2027, along with $167 billion in total debt. The downgrade highlights Oracle's substantial debt levels and financial challenges.

Meanwhile, in Madison, Wisconsin, the Public Service Commission failed to include a crucial rule amendment on its agenda, symbolizing a missed opportunity to address a new rate structure imposed by We Energies on its largest customers. The rule, approved in April, requires customers rated below A- to post financial guarantees before the utility can supply electricity, amounting to over $100 million annually for the privilege of powering the Port Washington campus, which is co-developed by Oracle alongside Vantage and OpenAI.

This situation poses significant financial strain, as Oracle is already facing a debt-to-equity ratio of over 400% and a declining stock price.

The commission's decision to postpone the rule consideration has heightened concerns about the long-term viability of the Port Washington campus project, which involves a gigawatt-scale facility. Despite Oracle's legal challenges against the commission's actions, the ratings downgrade adds to the pressure, potentially deterring investors and undermining the company's financial stability.

The situation is not isolated, as many states have recently introduced similar large-load tariffs, raising concerns about the broader implications of such regulatory decisions on capital investment and infrastructure development.