Fitch Rates Orlando Utilities Commission, FL's $125MM Util Sys Revs 'AA'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns the following ratings to the Orlando Utilities Commission (OUC), FL's utility system revenue refunding bonds:

--Series 2010-E 'AA'.

Fitch affirms the following long-term ratings at 'AA':

--$505 million senior and subordinate lien water and electric revenue bonds;

--$1.4 billion utility system revenue bonds;

--$8 million St. Cloud combined utility system revenue bonds.

In addition, Fitch affirms the following short-term ratings at 'F1+':

--Series 2010-D.

The Rating Outlook is Stable.

RATING RATIONALE:

--The water and electric system's healthy financial metrics include consistently strong coverage of debt service in line with the rating category medians.

--Difficult economic conditions within the utility's service territory have neither impacted coverage ratios nor prompted an increase in the utility's dividend payment to the city of Orlando.

--In a region where generation is largely natural gas-based, OUC's coal-based capacity (63% coal [includes coal and refuse]) has enabled the utility to provide some of the lowest cost electric service in the state for the past five years.

--Capacity is sufficient to meet current demand and load requirements. No new debt is expected to be issued over the next 18 months as the system uses still available construction funds and current revenues to pay for capital improvements.

KEY RATING DRIVERS:

--Management's ability to maintain financial metrics at or better than the currently satisfactory levels.

--Coverage levels must account for the utility's transfer payments to the city of Orlando, which are set at 60% of income before contributions through 2011.

SECURITY:

The bonds are secured by net revenues of the electric and water system.

CREDIT SUMMARY:

OUC's combined municipal utility system providing electricity and water continues to exhibit sound financial metrics. Fiscal 2009 debt service coverage was 2.26 times (x) and cash was equal to 163 days operating expenses. Discussions with management indicate that fiscal year 2010 financial performance is trending slightly better than 2009 due to increased energy sales related to the weather. The weak economic conditions and conservation have slowed the utility's need to build new generation. Its five-year capital plan has declined from $1.5 billion to $1.1 billion over the past two years and is centered primarily on plant improvements and retrofits. The utility continues to pay for approximately 50% of system improvements out of current revenues, which is more conservative than other public utilities.

Providing service to 206,943 customers in city of Orlando, St. Cloud and adjoining portions of Orange County, FL, OUC is among the largest public power utilities in the country. Revenues are weighted towards the electric system, which accounts for 92% of total revenues, while the water system accounts for 8%. The utility maintains full authority to establish and change retail rates, which have been among the lowest in the state of Florida for the past five years. Rates have been aided by a competitive resource mix that is primarily coal, compared to the state, whose capacity is 54% natural gas. OUC's coal-based portfolio has recently been lower cost and more stable than the natural gas-based systems in the state despite political opposition to the carbon generated by coal-based resources.

NEW ISSUE:

The bonds, totaling $150 million are expected to sell via negotiation in late September 2010 and refund series 2001, 2002C, 2003A, and 2003B bonds.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in the report 'Revenue-Supported Rating Criteria', this action was additionally informed by CreditScope and EIA.

Related Research:

--'Revenue-Supported Rating Criteria', dated Aug. 16, 2010;

--'Public Power Rating Guidelines', dated June 11, 2009.

For information on Build America Bonds, visit 'www.fitchratings.com/BABs'.

Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548606

Public Power Rating Guidelines

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=447150

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.