NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an initial 'A-' rating to the following Public Power Generation Agency, NE's (PPGA) revenue bonds:
--Approximately $250,000,000 million Whelan Energy Center Unit 2 revenue refunding bonds 2015 series A.
The bonds are scheduled to price via negotiation on April 28. The 2015 series A bonds will refund a portion of outstanding Whelan Energy Center Unit 2 revenue bonds 2007 series A for interest savings and pay the costs of issuance.
The Rating Outlook is Stable.
The bonds are secured and payable from payments made by the participants under the participation agreements and other funds established under the resolution.
KEY RATING DRIVERS
SMALL JOINT ACTION AGENCY: PPGA is a small joint action agency comprised of a mix of five municipal wholesale and retail electric providers located across a broad six-state region. The agency was created to finance, construct, own and operate the Whelan Energy Center Unit 2 Project (the project), which began commercial operation in on May 1, 2011.
SOLID PROJECT PARTICIPANTS: The credit quality of the project participants and the take-or-pay participant agreements that extend to the later of final bond maturity or decommissioning of the project underpin the project rating. Municipal Energy Agency of Nebraska (MEAN; rated 'A'/Outlook Stable) and Heartland Consumers Power District (Heartland; rated 'A-'), are by far the largest participants, accounting for almost 75% the project entitlement shares. Each of the five participants exhibit solid credit fundamentals supportive of the 'A-' rating.
EXPOSURE TO LARGEST PARTICIPANTS: A 30% step-up provision included in the participant agreements provides additional bondholder protection from a default of one or more participants with the exception of MEAN and Heartland, whose 36.6% entitlement shares of project output would not be sufficiently covered by the other participants. The PPGA rating is therefore currently capped by the weaker of the MEAN and Heartland ratings.
COMPETITIVELY PRICED POWER: The cost of project power has been largely competitive since coming online in 2011, and should improve as forecast project performance normalizes. The 2015 cost of power is expected to approximate $56.52/MWh. In addition, modest capital needs and emission-control technology should keep the project's rates stable at least over the medium-term.
CHANGES IN PARTICIPANT CREDIT QUALITY: The credit quality of the project participants will remain an important consideration in future rating actions. Given the concentrated exposure to both MEAN and Heartland, the PPGA should remain driven by the weaker of the two participant ratings.
PPGA is a joint action agency created in 2005 for the sole purpose of owning, financing, acquiring, constructing and operating the project. The agency's five participants include the MEAN, Heartland, Hastings Utilities (NE), Grand Island Utilities (NE) and Nebraska City Utilities (NE).
Both MEAN and Heartland provide wholesale electric power and related services to their respective members, which own and operate electric distribution systems dispersed throughout portions of Nebraska, Colorado, Wyoming, South Dakota and Minnesota. PPGA's three remaining participants are Nebraska-based municipal electric utilities providing electric service on a retail basis. Electric rates charged by the participants, who serve on a combined basis slightly more than 200,000 customers, are not subject to regulation by any other regulatory agency at the state or federal level.
The Whelan Energy Center Unit 2 is a 220 megawatt (MW), pulverized coal-fired generating plant located near Hastings, Nebraska. The project, which began commercial operation in 2011, provides PPGA's members with a reliable, long-term baseload power supply resource. The unit was constructed with the latest emissions controls technology, which should limit the scope of future capital needs. MEAN and Heartland each hold a 36.36% share in the project, providing both with 80 MW of associated capacity. The remaining 60 MW is allocated among the three remaining participants. PPGA sells the entire output of the 220-MW project to its five participants pursuant to participation agreements that extend through the final maturity of the related debt.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria', June 16, 2014;
--'U.S. Public Power Rating Criteria', March 18, 2014;
--'U.S. Public Power Peer Study', June 13, 2014.
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
U.S. Public Power Rating Criteria
U.S. Public Power Peer Study -- June 2014