Fitch Ratings has affirmed the "A" rating on the issuance by the Unified Government of Wyandotte County/Kansas City Board of Public Utilities of approximately $510 million utility system improvement bonds.
Additionally, Fitch has assessed BPU's Standalone Credit Profile (SCP) at "a." The SCP represents the credit profile of the system on a standalone basis, independent of its relationship with the credit quality of the UG of Wyandotte County/Kansas City.
The Rating Outlook has been revised to Positive from Stable.
The affirmation of the "A" ratings reflects the combined utility's solid revenue defensibility, very low operating costs, and strong leverage profile. Leverage declined to 5.4x in fiscal 2024 (ended December 31) as debt continued to amortize and operating cash flows remained strong.
The UG and BPU "are in discussions with several sizable data centers that are considering locating with the service territory, which could lead to meaningful modifications in BPU's financial and capital forecast depending on the scope and timing of any new load requirements," Fitch said.
On June 26, the UG full commission approved rezoning that will allow one of the projects, which is expected to require up to 600 MW of power, to move forward.
Fitch "expects greater clarity over the next year regarding significant additional load that may locate within BPU service territory. Fitch will evaluate any potential changes to the utility's business risk and financial profile."
The Positive Outlook reflects that, "despite this uncertainty, BPU's financial profile has improved meaningfully over the last three years and could support a higher rating. BPU retains substantial rating headroom to absorb additional capital costs and higher leverage that may be associated with facilitating new large load customers, even at a higher rating level."
Fitch said that BPU's operating risk ('aa') assessment "reflects the utility's very low electric operating cost burden averaging 10.0 cents per kilowatt hour over the past five years. Fitch's operating cost burden calculation include general fund transfers, which have been volatile. However, the maximum allowable transfer has been reduced to 12%, which slightly above current levels."
Operating cost burden has remained stable, reflecting BPU's diversified power supply mix, which can mitigate rising costs for purchased power or fuel. BPU's 2024 power supply mix was 30% coal, and 21% gas, with the remaining portion from net power purchases. Contracted renewable resources provided the utility with approximately 48% of its power supply in 2024.
In 2024, BPU updated its integrated resource plan (IRP), which indicated a need for incremental generation additions to meet resource adequacy requirements set by Southwest Power Pool the regional energy market BPU participates in. The 2024 IRP did not contemplate additional resource requirements that would be necessitated by new large load customers, according to Fitch.
"Capital needs are high but expected to be manageable, with an estimated cost of $362 million over the next five years. Fitch anticipates that if additional infrastructure is needed to connect new large loads, the cost of those improvements would be covered by the new customers."
.
