WMMPA expects to price the bonds
Fitch also affirms the following outstanding bonds:
The Rating Outlook for all bonds is Stable.
The bonds are secured by a pledge of all revenue derived by WMMPA from the operation of its power supply and transmission resources, including all of the revenue received from Missouri River Energy Services (MRES) under a long-term power sales contract (PSC).
KEY RATING DRIVERS
FINANCING AND POWER SUPPLY AGENCY: WMMPA is a municipal joint action agency that was principally created to finance and acquire power and transmission resources on behalf of MRES, a power supply joint action agency, which lacks joint financing authority. The agency has established financial targets that help support the 'AA-' rating.
STRONG CONTRACTUAL AFFILIATION: WMMPA has sold the entitlement to its resources to MRES via the PSC, which enables MRES to supply supplemental power to 60 of its 61 municipal members under long-term take-and-pay power sales agreements. The PSCs of all but one of the members extends to
VALUABLE HYDROELECTRIC POWER SUPPLY: Nearly all of the MRES members benefit from a firm allocation of low-cost hydroelectric power from the
LOW-COST POWER RESOURCES: WMMPA's power resources provide lower cost power (
SUBSTANTIAL DEBT FOR NEW PROJECT: The anticipated debt issuance will fund the majority of costs associated with the construction of the RRHP. While the project will provide needed capacity for MRES' members and help diversify the generation mix, outstanding debt will more than double and leverage will be well above rating category medians, and members' rates will need to increase, albeit modestly.
FAILURE TO MANAGE CONSTRUCTION PHASE: WMMPA's rating and Outlook are predicated on Fitch's view that the agency will manage rates and cash flow through the upcoming construction phase to support financial metrics at the levels observed in recent years. Failure to do so would likely lead to downward pressure on the rating or Outlook.
REDUCED COMPETITIVENESS: A significant increase in the cost of production due to environmental compliance or an unexpected outage at LRS that reduces the regional price competitiveness of the WMMPA/MRES power supply could also add rating pressure.
WMMPA was created in 1976 to finance and own electric generation and transmission resources generally for the benefit of the MRES membership. WMMPA's current membership consists of 23 Minnesota municipalities, all of which are also MRES members.
MRES is comprised of 61 member communities located throughout
DIVERSE, LOW COST POWER SUPPLY
WMMPA has acquired a portfolio of power supply resources with capacity totaling 486 MW, as well as transmission facilities necessary to deliver power supply to certain of the members. WMMPA's owned generation portfolio includes natural gas-fired capacity (140 MW) and some wind capacity, but roughly 70% of the agency's power supply is derived from its ownership interest in the LRS. In addition to owned resources, MRES has contracted for 132 MW of additional generating capacity from its members, 33 MW of nuclear capacity and 82 of wind capacity. This blended, lower cost resource mix has been one of the strengths of this agency.
LARGE CAPITAL PLAN
Capital expenditures are expected to increase meaningfully over the next five years as the agency moves forward with the RRHP and its continued participation in the CapX 2020 transmission planning effort. Capital expenditures are expected to total approximately
The current capital plan does not include the cost of potential upgrades needed at the LRS, which may require additional debt financing. An
Additional information is available at 'www.fitchratings.com'.
--'U.S. Public Power Peer Study --
--'U.S. Public Power Peer Study Addendum -
--'U.S. Public Power Rating Criteria' (
--'2014 Outlook: U.S. Public Power and Electric Cooperative Sector' (
U.S. Public Power Peer Study --
U.S. Public Power Peer Study Addendum -
U.S. Public Power Rating Criteria
2014 Outlook: U.S. Public Power and Electric Cooperative Sector (Calm Under Pressure)
Source: Fitch Ratings
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