Bond proceeds will refund the outstanding 2009 series A&B subordinate lien bonds for savings.
Fitch also affirms its 'AA-'rating on IPA's outstanding
The Rating Outlook is Stable.
The bonds and notes are secured by revenues from the long-term Power Sales Contracts (PSCs) between IPA and its power purchasers. All senior lien debt has been repaid. The senior lien will remain open, but the agency has no plans to issue additional bonds under this lien.
KEY RATING DRIVERS
EFFICIENT POWER PROJECT: IPA owns the
STRONG PURCHASERS: Project participants include 36 entities throughout
FAVORABLE POWER SALES CONTRACTS: The power purchasers are unconditionally obligated to pay all costs of operation, maintenance and debt service, whether or not the project is operating, pursuant to strong take-or-pay power sales contracts (PSCs) with implied step-up provisions.
LIMITED IMPACT OF ENVIRONMENTAL RULES: IPA's existing pollution-control equipment meets the requirements under
DECREASING LEVERAGE: The agency has been rapidly paying down outstanding debt. IPA's publicly held debt has been reduced by more than 60% in the past 10 years and senior debt has been fully replaced with subordinate debt issued under a more flexible indenture. The commercial paper program, which constitutes 28% of outstanding debt, is IPA's only exposure to variable-rate obligations.
The project, operated by LADWP, has historically had a high degree of availability that exceeds industry averages in addition to a high capacity factor that indicates its competitive cost position in the region. Performance metrics have returned to more normal levels in fiscal 2013, after a prolonged, unplanned outage in fiscal 2012 significantly weakened operations for the period. The outage resulted from a generator failure at Unit 1, causing it to become inoperable. Unit 1 was repaired and put back in use, and unit design was updated at both units.
The PSCs expire on
STRONG PURCHASERS & CONTRACTS
Favorably, the majority of the project's output is sold to six financially strong
Credit strength is derived from the unconditional take-or-pay nature of the PSCs. In the event of default by a purchaser, IPA's flexible budgeting process results in an unlimited implied step-up obligation for the performing purchasers. However, given LADWP's sizable entitlement share, it is unclear if the remaining purchasers would be able to absorb its payments in the event of an LADWP default.
Environmental laws and regulations at the state and federal level remain a concern because of their potential cost impact on the purchasers and the project. Currently enacted
IPA is working with all of the purchasers to develop a project repowering strategy that includes building a new gas-fired unit to comply with
Additional information is available at 'www.fitchratings.com'.
--'U.S. Public Power Rating Criteria' (
--'U.S. Public Power Peer Study Addendum -
--'2014 Outlook: U.S. Public Power and Electric Cooperative Sector' (
--'U.S. Public Power Peer Study --
U.S. Public Power Rating Criteria
U.S. Public Power Peer Study Addendum --
2014 Outlook: U.S. Public Power and Electric Cooperative Sector (Calm Under Pressure)
U.S. Public Power Peer Study --
Source: Fitch Ratings
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