6.1a ERMUSR 08-14-2018 - Laserfiche WebLink

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MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE to meet increased electric requirements and has the ability to adjust its energy charge through an energy adjustment clause should market derived power prices increase greater than anticipated. MMPA believes that keeping power prices to its members at or near current levels and no need for constructing incremental generating resources will allow it to build-up significant cash reserves that could be used to retire debt beginning 2020. State Regulatory Initiative Minnesota has one of the most aggressive renewable energy standards in the US. By 2025, 25%of all retail energy sold must be from renewable generation.This has ramped up from 17% by 2016, moving to 20% by 2020 and to 25% by 2025. Electricity generated by solar,wind,hydroelectric and biomass are eligible technologies under the standards. Moreover, open market purchases of RECs count toward the requirements. MMPA appears to be well positioned through a combination of owned and contracted resources to meet the renewable energy standard. MMPA's 2017 renewable generation was approximately 450,000 MWh's or 30% of retail energy sold. LIQUIDITY MMPA's available cash is sufficient,totaling approximately$56 million at December 31, 2017 or more than 250 days cash on hand. External liquidity is provided under a $20 million revolver due May 2019 with US Bank National Association (Al,stable).There was no amount borrowed under the revolver as of December 31,2017. DEBT STRUCTURE MMPA has a manageable debt profile.The utility's debt balance as of December 31, 2017 consisted of approximately$263 million of Electric Revenue Bonds.The Electric Revenue Bonds are secured by a pledge of the net revenues of the system and the indenture requires MMPA to set rates sufficient to produce at least 1.15x coverage of annual debt service. Scheduled debt maturities approximate $10 million in each of 2018 and 2019. PENSIONS AND OPEB Management and operations of MMPA is outsourced to Avant and as such has no employees and no pension obligation. Management and Governance MMPA's rating considers that it does not have any employees, making it somewhat unique amongst its peers. Rather,the JAA outsources all management and operational functions to various third-party vendors,a strategy that alters the entity's risk profile relative to its peers.That said,we have gained a degree of comfort with the Agency's long-term relationship with Avant Energy, Inc. (Avant),an unaffiliated energy management company that has provided management services for MMPA under contractual arrangements since 1992.The current contract between Avant and MMPA extends to 2026. 3 1 August 2018 Minnesota Municipal Power Agency:Update following Moody's Upgrade to Al from A2;Outlook Stable 146