(Source: Business Wire)
Fitch Ratings assigns an 'AA+' rating to Chelan County Public Utility District No. 1 (the district) Washington's $21.9 million and $8.5 million series 2009A and 2009B, respectively, consolidated system subordinated notes. Outstanding ($53.7 million) parity subordinated revenue notes are affirmed at 'AA+' by Fitch. In addition, Fitch also affirms outstanding senior ($486.3 million) and subordinated ($173.3 million) consolidated system revenue bonds and hydroelectric project revenue bonds (aggregate $286.2 million). The Rating Outlook is Stable.
The fixed rate 2009 notes, with a three, four or five year maturity, are secured by a third lien net revenue pledge of the district's consolidated system, after payment of debt service on senior and subordinate lien consolidated system bonds. Fitch does not make a rating distinction between the three liens. The 2009 notes are scheduled to price July 8, 2009. The district intends to refinance the notes at maturity with long-term debt. Further details regarding the 2009 notes and Chelan's refinancing plan are available at the end of this release.
Chelan's 'AA+' rating is supported by very low cost hydroelectric power resources (average power cost of 18 mills/kwh), among the lowest retail electric rates regionally and nationally, ample distribution system cash reserves, and continued modest retail load growth despite economic downturn. Additionally, in February 2009, Chelan attained federal relicensing of Rocky Reach, its last and largest hydroelectric project, extending the project operating license another 43 years. With this relicensing, all of Chelan's hydropower projects have successfully extended their operating licenses, alleviating a key credit concern Fitch has historically noted. Other credit positives include strengthened financial targets (i.e., minimum cash reserves augmented to $130 million from $50 million), completion of a comprehensive strategic business plan, and more favorable new hydropower sales contracts that go into effect in 2011/2012.
Remaining credit concerns center on two related factors: exposure to varying hydrological conditions in the northwest and their impact on the district's distribution system net surplus or nonfirm power sales (46% of operating revenues for fiscal year 2008). As the existing hydropower sales agreements expire in 2011 and 2012, the district's hydropower allocation will increase to 47.8% of the output (from 30% currently) from the combined hydro projects. As a result, the district's surplus power sales will grow.
