Fitch: US Public Power Trending Well, Capex Still Declining

NEW YORK--()--Most public power issuer metrics remained strong through 2015 and support our stable outlook for the sector, Fitch Ratings says. After peaking in 2008/2009, capital expenditures declined across the board, continuing into 2015. This trend likely helped issuers to maintain their healthy levels of debt service coverage and reasonable leverage. We expect these trends to continue over the near term.

Median ratios for total debt to funds available for debt service were largely stable or lower for all rating categories (AAA/AA, A and BBB/BB) in 2015, according to Fitch's "US Public Power (Peer Study)". Debt per retail customer, which provides another measure for relative comparison of leverage, was also lower.

Debt service coverage at wholesale systems (utilities with revenues primarily derived from sales to municipally owned retail power systems) and retail systems (which derive the majority of their revenues from sales to end-user customers) across the ratings spectrum was stable, while cash on hand at all retail systems and higher rated wholesale systems rose. These trends are consistent with the sector's declining capital investment and related funding requirements, as well as sustained economic growth and improving affordability metrics, which have moderated rate pressures in recent years for most issuers.

Declining capital investment ratios throughout the public power sector largely reflect lower direct investment in new generating capacity and expansion projects as a result of slower demand growth and excess market capacity. We expect trends toward lower investment, sustained debt service coverage and moderate leverage to continue over the near term as no additional coal-fired or nuclear capacity will likely be built over the near term and most renewable resources will be contracted.

Both "US Public Power (Peer Study)" and "2016 Fitch Analytical Comparative Tool (FACT) -- Public Power" are available at www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Related Research

2016 Fitch Analytical Comparative Tool (FACT) -- Public Power

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882964

U.S. Public Power (Peer Study)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882785

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Contacts

Fitch Ratings
Contact:
Dennis Pidherny
Managing Director
U.S. Public Finance
+1 212 908-1738
or
Rob Rowan
Senior Analyst
Fitch Wire
+1 212 908-9159
or
Media Relations
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Contact:
Dennis Pidherny
Managing Director
U.S. Public Finance
+1 212 908-1738
or
Rob Rowan
Senior Analyst
Fitch Wire
+1 212 908-9159
or
Media Relations
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com