Fitch Ratings on Aug. 18 said it had upgraded certain bonds issued by the Klickitat County Public Utility District No. 1, WA (KPUD) to “A” from “A-“.
Specifically, it ungraded $135.8 million electric system revenue and refunding bonds, series 2015B (taxable), series 2019A, series 2019B (taxable), series 2024, series 2025 (delayed delivery).
In addition, Fitch has also upgraded the district's Issuer Default Rating (IDR) to “A” from “A-“.
The Rating Outlook is Stable.
The upgrade to "A'" reflects the district's continued strong financial performance, demonstrated by healthy operating margins, consistently lower leverage and a sound liquidity position, Fitch said.
"The upgrade further reflects Fitch's expectation that performance in 2025 and thereafter will be consistent with the higher rating and that non-traditional revenue from the district's long-term renewable natural gas project (RNG) contract will remain at forecasted levels. This relies on the project continuing to operate successfully and producing gas that meets the required specifications in the district's fixed-price renewable natural gas sales contract. The rating reflects the solid fundamentals of the district's low-cost electric utility operations."
The district has contracted with Puget Sound Energy to purchase the full output of the RNG. Wholesale gas revenues from the RNG account for about 31% of KPUD's consolidated revenues in 2024, Fitch noted.
The RNG sales began in 2019, when the H.W. Hill RNG project became operational. RNG revenues increased in 2024 due to a full year of production sold at higher long-term contract pricing and increased production volume due to a continued focus on optimizing the landfill gas collection system feeding the facility and successful utilization of an automated well field tuning system.
KPUD's leverage profile, measured by Fitch as net adjusted debt to adjusted funds available for debt service, was strong at 4.7x in fiscal 2024. Leverage is expected to remain at or below 5.0x in Fitch's rating case through 2029 but does depend on continued performance of the RNG and electric rates to keep pace with increasing power costs.
The bonds are payable from a gross revenue pledge on electric system revenues subject to the prior payment of operating expenses.
