Fitch Rates Bd of Public Utilities of Springfield, MO COPs 'AA'; Outlook Stable

NEW YORK--()--Fitch Ratings has assigned an 'AA' rating to approximately $36.9 million of certificates of participation (COPs), series 2014, evidencing fractional interests in lease obligations of the Board of Public Utilities of the City of Springfield, Missouri (city utilities). It is anticipated the COPs will be available for delivery via competitive bid on Oct. 9, 2014.

In addition, Fitch currently rates the following city utilities 'AA':

--$596.52 million public utility revenue bonds, series 2006;

--$38.78 million COPs, series 2006A&B;

--$49.94 million COPs, series 2012.

The Rating Outlook is Stable.

SECURITY

The COPs and the representative lease obligations are subordinate to the revenue bonds issued by city utilities, and are secured by a lien on combined excess revenues of the public utility system and a security interest in the assets financed with the leases.

The public utility revenue bonds are secured by a senior lien on combined net revenues of the public utility system, inclusive of the electric, natural gas, water, transportation and telecommunication systems.

KEY RATING DRIVERS

DIVERSIFIED UTILITY SERVICE PROVIDER: The city of Springfield (the city) operates a combined utility system. The largest of the utility's services is the electric system, which accounted for 65% of fiscal 2013 (Sept. 30) revenue.

SOUND FINANCIAL METRICS: Financial metrics have tightened somewhat since 2008 due to slowed energy sales and increased debt associated with the John Twitty Energy Center Unit 2 (JTEC Unit 2); however, they remain at sound levels and are adequate for the 'AA' rating category.

REGULAR RATE ADJUSTMENTS ANTICIPATED: The utility has demonstrated a willingness to adjust rates to support ongoing capital projects and increased debt service obligations. Implementation of planned rate increases should bolster financial metrics and bring debt service coverage (DSC) above the utility's minimum target of 2x in fiscal 2014. Competitive rates provide sufficient rate-making flexibility.

DIVERSE SERVICE AREA: The city's economy is varied, with a range of industry sectors and minimal customer concentration. Residential sales make up a healthy 42% of combined retail revenue, which provides stability.

REGULATORY EXPOSURE: The majority of the electric system's power is derived from coal-fired generation, which could pose a challenge for the utility as environmental standards become more stringent. Positively, the capital plan includes plant upgrades and conversions to make the utility Mercury and Air Toxics Standards (MATS) compliant in 2015.

RATING SENSITIVITIES

MANAGEMENT OF RATES: Given increasing environmental standards that have the potential to be costly, along with variability in electric, natural gas and water sales, managing rates to maintain sound financial performance is key to the rating.

CREDIT PROFILE

See the press release Fitch Rates Bd of Public Utilities of Springfield, MO Lease Obligations 'AA'; Outlook Stable, dated Sept. 19, 2014, available at www.fitchratings.com, for additional information.

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

Applicable Criteria and Related Research:

--'U.S. Public Power Peer Study -- June 2014' (June 13, 2014);

--'U.S. Public Power Peer Study Addendum - June 2014' (June 13, 2014);

--'U.S. Public Power Rating Criteria' (March 18, 2014);

--'2014 Outlook: U.S. Public Power and Electric Cooperative Sector' (Dec. 12, 2013).

Applicable Criteria and Related Research:

2014 Outlook: U.S. Public Power and Electric Cooperative Sector (Calm Under Pressure)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725447

U.S. Public Power Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=740841

U.S. Public Power Peer Study -- June 2014

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749789

U.S. Public Power Peer Study Addendum - June 2014

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750283

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=888854

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Contacts

Fitch Ratings
Primary Analyst
Stacey Mawson, +1-212-908-0678
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Alan Spen, +1-212-908-0594
Senior Director
or
Committee Chairperson
Kathryn Masterson, +1-512-215-3730
Senior Director
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Stacey Mawson, +1-212-908-0678
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Alan Spen, +1-212-908-0594
Senior Director
or
Committee Chairperson
Kathryn Masterson, +1-512-215-3730
Senior Director
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com