Fitch Rates Illinois Municipal Electric Agency's $322.1MM 2009 Revs 'A+'.
--$307.525 million series 2009A 'A+';
--$14.575 million taxable series 2009B 'A+'.
Fitch also affirms IMEA's outstanding power supply system revenue bonds at 'A+'. The Rating Outlook is Stable.
Proceeds from the series 2009 bonds will fund IMEA's remaining portion of the Prairie State Generation Station (PSGS) construction, capitalize interest for six months after scheduled completion of the PSGS, fully fund the debt service reserve fund to the maximum annual debt service requirement and pay the cost of issuance. IMEA may issue Build America Bonds and will make that decision closer to the sale date. The bonds are scheduled to price the week of July 13, 2009.
IMEA has a 15.17% ownership interest (approximately 240 mega-watts [MW]) in the PSGS, a 1,600 MW coal-fired generating station consisting of two supercritical units. The project also includes the development of a coal mine and related facilities. As of April 2009, the PSGS Project was 16% complete although the engineering design work is 72.3% complete. IMEA's current estimate of the Project cost is $2,744 per KW (including the development cost of the coal mine).
The rating reflects the member's proven support of IMEA, through long-term take-and-pay all-requirements contracts, the system's relatively low cost and flexible power resources. In addition, IMEA's solid financial margins and self liquidity are comparable to other public power systems in the 'A+' category. Further support for the rating comes from the members' competitive and stable retail rates (relative to those of regional IOUs), and IMEA's proactive management.
As part of a future generation strategy to meet its participating member's needs, IMEA plans to replace expiring power purchase contracts and increase its owned generation resources. In addition to its participation in PSGS, IMEA is a 12.12% (approximately 91 MW) participant in the construction of Trimble County Unit 2 (TC2), a 750 MW pulverized-coal super-critical unit that will be located adjacent to the existing Trimble County Unit 1 (TC1), of which IMEAs owns a 12.12% (approximately 62 MW) share of the TC1 plant. As of April 2009, TC2 is 60.5% complete and is on schedule to meet its June 2010 guaranteed completion date. IMEA's cost for TC2 is projected to be $1,635 per KW.
Credit concerns include ongoing construction risks, the affects of the current economic downturn and uncertainty associated with proposed greenhouse gas legislation and the affect on IMEA's cost structure and financial metrics in relation to its peer group.
With regard to member customer composition, the members' consist of an above average mix of commercial and industrial customers that make up IMEA's members' energy sales. Mitigating this risk is the members' competitive retail rates and that no single customer accounts for more than 2% of IMEA's revenues.
IMEA's historical financial performance reflects solid debt service coverage and adequate liquidity. Although IMEA's debt levels have increased substantially as it funds the construction of TC2 and PSGS, IMEA and its participating members appear to have the financial ability to service this level of debt. It should be noted that the debt has been structured so that increased future debt service costs should be offset by reduced purchased power operating expenses.
IMEA is a joint action agency in Illinois comprised of 32 member municipalities throughout the State of Illinois. The participating members in turn provide residential, commercial and industrial electric service to their respective service areas. While the members are relatively small cities and villages, the recent addition of the City of St. Charles in 2007 and the addition of the City of Naperville in 2011 will increase peak demand and aggregate energy usage. Participating members have a combined population of 330,000 and the members provide electric service to approximately 158,300 primarily residential customers. While participating members have historically experienced peak demand and energy usage growth, there has been an average decrease of approximately 5% on energy usage during Fiscal Year 2009. This is partially due to conservation but also due to reduced industrial activity. This slow down in energy usage among participating members of IMEA was somewhat masked by the addition of the City St. Charles as a participant in 2007. Members have reported some cutbacks and closings of industrial customers but overall, the member communities do not appear to be as adversely affected by economic and housing issues as other parts of the country. In light of the economic slow down, IMEA has reduced its load forecast for planning purposes and is now anticipating approximately 1% load growth going forward (excluding Naperville and Red Bud commencing service in 2011).
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|Date:||Jun 12, 2009|
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