6.1a ERMUSR 08-14-2018 - Laserfiche WebLink

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MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE Key indicators Exhibit 1 MINNESOTA MUNICIPAL POWER AGENCY 2016 2017 Total Sales (mWh) 1,533,105 1,517,874 Debt Outstanding ($'000) 313,129 281,528 Debt Ratio (%) 79.4 72.3 sourcAd { EyasiL1quidity on Hand (incl. Bank Lines)(days) 203 261 Prdcted Obligation Charge Coverage (x) 1.4 1.4 MMPA is a municipal corporation existing under the laws of the State of Minnesota and founded for the purpose of securing an adequate,economical and reliable supply of electricity for its members.The members are cities located throughout Minnesota and have a diverse economic base. Each municipal member owns and operates an electric system which distributes and sells powers to its customers. Detailed credit considerations Resilient Service Area with Unregulated Rate Setting Ability Key drivers for MMPA's Al rating include the strong credit profile of its membership,who operate largely in the northern and southwestern suburbs of Minneapolis-St. Paul,an economically strong region,and the Agency's unregulated rate setting ability. The Agency's twelve municipal members have a weighted average credit quality that approximates the higher end of the "A" rating category.The weighted average credit assessment incorporates the Aa3 assigned to Elk River Municipal Utilities,who we anticipate will be MMPA's third largest customer when its joins the membership in October and the Al ratings assigned to Shakopee Public Utility Commission and Chaska Electric Enterprise,the two largest members. Each member has entered into individual power sale agreements(PSA)with MMPA that expire December 2050,with the exception of the City of Le Sueur and the City of Olivia that expire October 31, 2040. Under each PSA,the members have agreed to purchase and receive all electric power required to meet the needs of its customers from MMPA. Payments by the members are made monthly and consist of three components:a flat monthly customer charge,a demand charge per kWh and an energy charge.The energy charge is adjusted through an energy adjustment clause. MMPA has the right to alter its rates at any time. Its bond indenture requires MMPA to set rates sufficient to cover debt service by at least 1.15x. Each member has covenanted under its PSA to maintain rates to its customers sufficient to provide revenues adequate to meet its obligations to MMPA under the PSA. Procurement and Financial Strategy Support Improved Credit Profile A challenge confronting MMPA has been the need to match the long-term needs of its members to generation sources while taking into consideration the addition of a new member and increasing transmission costs while maintaining competitive rates. One answer has been to build distributed generation that is directly interconnected to its members electric distribution system,freeing up other generating resources.To that end, MMPA achieved commercial operation in February 2017 of the 46 megawatt Shakopee Energy Park that uses fuel-efficient reciprocating engines to generate local power for the city of Shakopee. MMPA has also entered into a long-term competitively priced capacity contract with a creditworthy third party that meets MMPA's capacity requirements from the Midcontinental Independent System Operator or MISO and replaces its need to construct incremental generating resources.Going forward, MMPA will rely on a combination of spot,contracted power purchases and owned resources This publication does not announce a credit rating action.For any credit ratings referenced in this publicanon,grease see the ratings tab on the issuer/entity page on www.rnoodys.com for the most updated credit rating action information and rating history. 2 1 August 2018 Minnesota Municipal Power Agency:Update following Moody's Upgrade to Al from A2;Outlook Stable 145