TEXT-S&P rates Spectra Energy Capital notes

(The following was released by the rating agency)

April 7 - Standard & Poor's Ratings Services today assigned its 'BBB' rating to Spectra Energy Capital LLC's (Spectra Energy Capital; BBB+/Stable/A-2) issuance of $500 million of senior unsecured notes. Spectra Energy Capital will use the proceeds from the notes to fund capital expenditures and for general corporate purposes, including the repayment of commercial paper. The outlook on Spectra Energy Capital is stable.

Houston, Texas-based Spectra Energy Capital is one of the primary operating subsidiaries of parent Spectra Energy Corp.(BBB+/Stable/--). As of Dec. 31, 2007, Spectra Energy had about $9.4 billion of total debt.

The ratings on Spectra Energy Capital are based on the consolidated credit quality of Spectra Energy and reflect its strong business risk profile and intermediate financial risk profile. The senior unsecured debt rating on subsidiary Spectra Energy Capital is 'BBB', reflecting structural subordination stemming from priority debt at subsidiaries encumbering more than 20% of total assets.

Spectra Energy owns natural gas transmission and gas storage assets in the U.S. (expected to contribute about 40% of EBITDA), natural gas distribution and storage assets in Ontario (Union Gas Ltd., 15%-20% of EBITDA), natural gas transmission and processing in western Canada (15% of EBITDA), and a 50% stake in DCP Midstream LLC (BBB+/Stable/A-2; 25%-30% of EBITDA).

The stable outlook on Spectra Energy reflects the company's strong business risk profile and currently adequate financial metrics for the ratings. However, as the company pursues proposed growth opportunities if the projects are financed disproportionately with debt, if the nature of these projects introduces incremental business risk, or if the company cannot execute on key projects and costs are notably over budget, then the ratings may be lowered or the outlook revised to negative.

"Any degree of financial underperformance below the projected level of key credit metrics could also result in lower ratings or a negative outlook revision," said Standard & Poor's credit analyst William Ferara. "Unless the financial profile demonstrates material and consistent improvement, a positive outlook or higher ratings are not currently contemplated," he continued.