Fitch Ratings has assigned and affirmed an “AA” rating to bonds issued by North Carolina’s Fayetteville Public Works Commission (PWC). The rating reflects PWC's very strong financial performance characterized by very low leverage, strong operating cash flow and healthy liquidity, Fitch said.
The rating outlook is stable for the public power utility, Fitch said.
Additional planned debt issuances to fund capital expenditures over the next five years will increase leverage for PWC, but Fitch believes revenue contributions from the utility's multiple business lines, which includes electric, water and wastewater systems, will continue to support ratios consistent with the current rating.
“PWC maintains strong revenue defensibility assessment, which is buoyed by each utility system's monopolistic revenue source characteristics and autonomous rate setting ability,” Fitch said.
The rating also considers an expectation for lower electric operating costs following the execution of PWC's renegotiated Power Supply and Coordination Agreement with Duke Energy Progress, LLC in November 2019.
The power supply agreement is expected to save PWC approximately $300 million through the remaining life of the contract which extends to 2042, although PWC has the option to terminate the contract in 2032, and in each year thereafter, if it provides a three-year written notice.
Fitch assigned the “AA” rating to approximately $98.3 million revenue bonds, series 2021, issued by PWC.
In addition, Fitch affirmed the “AA” rating to approximately $266.6 million outstanding series 2014, series 2016 and series 2018 parity revenue bonds issued by PWC.
In addition, Fitch has assessed PWC's Standalone Credit Profile (SCP) at “aa.” The SCP represents the credit profile of the utility on a stand-alone basis irrespective of its relationship with and the credit quality of the city of Fayetteville, N.C.