Bonds and Financing

Moody’s maintains stable outlook for public power sector

Moody's Investors Service is maintaining its stable outlook for the public power electric utility sector for 2019, reflecting declining leverage and growing liquidity amid an operating environment of low electricity demand, favorable interest rates, and low natural gas prices.

“Key financial metrics are expected to remain stable despite the addition of pension and other post-employment benefit liabilities to total debt outstanding figures, which has impacted adjusted debt ratios within the sector,” Moody’s said on Dec. 5.

The rating agency expects median fixed obligation charge coverage (FOCC) of about 1.80x in 2020, with days liquidity on hand and debt ratios also remaining stable in the coming year.

Low natural gas prices will continue, according to Moody’s, contributing to lower or stable power prices in most regions and enabling lower rate increases alongside the maintenance of stable credit metrics. Total debt outstanding and adjusted debt outstanding will also continue to decline, according to the rating agency.

"While there are some pockets of higher load demand growth, the sector will continue to see mostly flat growth in 2020," said Jennifer Chang, a vice-president at Moody's and the lead author of the report. "Key growth factors like changing demographics and economic development are concentrated in particular regions while energy efficiency and stable economies impact the sector overall."

Simultaneously, the sector continues to face moderate credit exposure to environmental and social risks.

Moody’s said that the carbon transition will continue to vary by region, with issuers in Midwestern states accounting for more than half the total coal-fired electricity generation in those states.

“Demographic and social trends are deemed the most prevalent social issue, and wildfire risk, particularly in California, remains a concern given uncertain treatment with respect to inverse

Public power entities receive positive rating agency actions

Several public power entities have recently received positive rating agency actions.

Examples include:

Grand River Dam Authority: The Grand River Dam Authority’s continued strong financial performance and its very low operating costs were among the key reasons that led Fitch Ratings to affirm GRDA’s A+ stable rating. Moody’s in early November cited a diverse and competitively priced resource mix, along with long-term customer contracts and rate setting ability, in affirming its A1 credit rating, with a stable outlook, for GRDA;

Florida Municipal Power Agency: Fitch in October announced a credit rating upgrade for FMPA to ‘AA-‘ from ‘A+’ ahead of the Orlando-based power agency’s planned bond refinancing in late-October;

Chelan County PUD: Fitch in late November reaffirmed Chelan PUD’s AA+ rating with a stable outlook.