6.1a ERMUSR 08-14-2018 - Laserfiche WebLink

Home Browse Search

FITCH UPGRADES MINNESOTA MUNICIPAL POWER AGENCY, (MN) ELEC REV BONDS TO 'A+'; OUTLOOK STABLE Fitch Ratings-New York-16 July 2018:Fitch Ratings has upgraded the ratings on the following Minnesota Municipal Power Agency(MMPA, or the agency) revenue bonds: --Approximately $187 million electric revenue bonds series 2013, 2014, 2014A and 2016 to 'A+' from'A'. The Rating Outlook has been revised to Stable from Positive. SECURITY The bonds are secured by the net revenues of MMPA, derived primarily from payments under long-term power sales agreements (PSAs)with 11 participating municipal electric systems. The bonds are further secured by certain personal property and contract rights covering the system. KEY RATING DRIVERS POWER RESOURCE STRATEGY: The rating upgrade reflects MMPA's shifting resource strategy from short-term market purchases to a combination of new locally-owned generation and competitively-priced inteiuiediate-term purchased power agreements (PPAs). As additional new generation is no longer needed to meet load growth, MMPA faces modest capital needs and no additional direct debt going forward. LEVERAGE EXPECTED TO CONTINUE IMPROVING: The upgrade also reflects Fitch's expectation the revamped resource strategy will result in a decline in leverage with approximately $50 million of debt amortizing over the next five years, no new debt and more muted rate increases than previously projected. Financial margins are projected to remain strong. MATURE JOINT ACTION AGENCY: MMPA is a joint action agency that has provided wholesale power supply to its 11 member cities since 1995. A 12th member will begin receiving power in October 2018. Power and energy are principally supplied pursuant to take-and-pay PSAs that were recently extended through 2050 by 10 members representing 94% of system load. The remaining contracts expire in 2040. CONCENTRATION WITH THE LARGEST MEMBERS: The largest members are Shakopee Public Utilities Commission, City of Chaska, and City of Anoka, which account for a sizeable 71% of the agency's revenues. Each member exhibits healthy overall credit characteristics and has been experiencing continued growth in retail electric sales in recent years. The remaining cities add limited geographic and economic diversification to the membership. SOLID FINANCES, STABLE ELECTRIC RATES: The agency maintains average wholesale power rates to members (7.32 cents/KWh in 2017)that are comparable or below neighboring investor-owned,municipal, and cooperative utilities. MANAGEMENT FUNCTIONS OUTSOURCED: MMPA relies on Avant Energy, Inc., a provider of energy management services,to manage virtually all functions of the agency including accounting, operations, and power and fuel market management. MMPA has no direct employees. Despite this unusual arrangement, Avant's track record in managing MMPA has been favorable. 139