Fitch Rates Orlando Utilities Commission's $115MM 2007 Utility Sys Revs 'AA'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch assigns an 'AA' rating to Orlando Utilities Commission's (OUC OUC Okanagan University College OUC Orlando Utilities Commission OUC Ontario Underwater Council OUC Open University of Cyprus OUC Ohio University - Chillicothe OUC Otaru University of Commerce (Otaru City, Hokkaido, Japan) OUC Ouchita Coaches, Inc. ) $115 million utility system revenue bonds, series 2007. The Rating Outlook is Stable. In addition, Fitch affirms the 'AA' rating on OUC's outstanding $1.44 billion of senior and subordinate lien bonds. The senior and subordinate liens are on equal parity following recent indenture amendments that came into effect in 2003. Proceeds from the 2007 bonds will fund a portion of OUC's five-year capital plan. The 2007 bonds will price the week of January 8, 2007 with Goldman Sachs The Goldman Sachs Group, Inc., or simply Goldman Sachs (NYSE: GS) is one of the world's largest global investment banks. Goldman Sachs was founded in 1869, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street. as lead underwriter Lead underwriter The head of a syndicate of financial firms that are sponsoring an initial public offering of securities or a secondary offering of securities. Could also apply to bond issues. . OUC's strong credit profile takes into account the utility's $1.1 billion in capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. anticipated through 2011. While substantial, Fitch notes that the capital plan will be funded with a reasonable 39% debt and 61% equity balance, which partially offsets risks associated with its size. Planned capital expenditures relate primarily to the construction of new generating assets (including the coal gasification Coal gasification The conversion of coal or coal char to gaseous products by reaction with steam, oxygen, air, hydrogen, carbon dioxide, or a mixture of these. project at the Stanton Energy Center) and upgrades to OUC's existing generating fleet. In addition to the series 2007 issuance, OUC expects to fund the remaining debt portion of the capital plan through two subsequent borrowings in 2008 and 2010. The 'AA' credit rating continues to reflect OUC's solid operating position, efficient generating portfolio, and competitive retail electric rates. OUC's predominantly coal-based generation portfolio has provided greater fuel cost stability relative to its peers, given the predominance of natural gas- and oil-fired generation in Florida. In fiscal 2006, OUC's energy sales came from a mix of coal-based generation (73.1%), natural gas (20.3%), nuclear generation (6.5%) and landfill gas (1.0%). To that end, as natural gas prices have tempered in recent months, OUC has initiated a 10.5% fuel rate decrease effective January 1, 2007 (coupled with a increase in base rates, total rates will decrease 3.8%). Credit drivers over the next several years center on OUC's ability to meet current fiscal targets. Per Fitch's review of OUC's unaudited financial statements, 2006 debt service coverage is expected to be about 2 times (x), in line with historical financial performance. OUC currently maintains $280 million in unrestricted cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. , equivalent to a healthy 185 days operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . Looking forward, while debt service coverage and equity targets are expected to remain consistent with historical targets, OUC expects to draw down some of its existing cash reserves to fund a portion of the capital plan as well as an increase in the transfer to the general fund of the City. OUC's 2006 transfer was $71.5 million, about 17.3 million, or 24% above the 2005 transfer. As a percentage of overall system revenue, OUC's current transfer is considered to be relatively high compared to transfers of other public power systems in the 'AA' rating category. Fitch anticipates that OUC's cash reserves will be partially replenished through future base rate adjustments and that liquidity should remain within Fitch's financial parameters for the rating category. Fitch believes that strong cash balances are an important contingency for OUC's overall credit profile, given recent fuel cost volatility and potential construction risk associated with the capital plan. OUC is a combined municipal utility providing electric and water service within the City of Orlando, the neighboring neigh·bor n. 1. One who lives near or next to another. 2. A person, place, or thing adjacent to or located near another. 3. A fellow human. 4. Used as a form of familiar address. v. City of St. Cloud, and adjoining portions of Orange County, FL. The electric system serves a total population of 355,000 and provides 92% of OUC's total revenues. For more information, please see Fitch's November 03, 2006 research report titled 'Orlando Utilities Commission'. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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