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Fitch Affirms Tri-State G&T's Senior Secured Bonds at 'A'.

NEW YORK -- Fitch Ratings has affirmed Tri-State Generation and Transmission Association's (Tri-State) secured and implied senior unsecured debt ratings at 'A' and 'A-', respectively. The secured rating reflects the underlying long-term rating and applies to $139.4 million publicly held pollution control revenue bonds (issued by Moffat County, CO and the City of Gallup, NM). While Tri-State has no unsecured debt outstanding, the implied rating essentially represents an unsecured counterparty rating. Tri-State is also the lessee and obligor, via an operating lease, to an off-balance debt financing for the construction of a third Springerville coal-fired generating unit in Arizona. The $760 million secured certificates issued by two pass-through trusts in 2003 on behalf of Tri-State are also affirmed at 'A-' by Fitch. The Rating Outlook is Stable.

Tri-State's credit strength stems from its competitive average wholesale rate (5.1 cents per kwh for 2006 including transmission), strengthening financial position, a fiscally prudent Board and management team, and a solidly growing, geographically and economically diverse customer base across four states. In addition, all the members have extended their power supply contracts with Tri-State to 2040, solidifying their commitment and support for Tri-State as their power supplier.

Financial coverage ratios are solid for the rating category, and the balance sheet continues to improve. Tri-State ended fiscal year 2005 (Dec. 31) with equity to total capitalization of 17.7% -- better than the median (15%) for rating category. Debt service coverage has steadily climbed since 2001, from 1.09 times (x) to 1.28x for fiscal year 2005. Tri-State's liquidity profile is favorable including over $113 million in cash and $150 million in unused committed bank lines of credit equal to approximately 178 days liquidity as of Dec. 31, 2005.

Credit weaknesses center on Tri-State's increasing short power supply position, upward rate pressure due to high natural gas and spot electricity market prices, and substantial capital infrastructure needs going forward.

With Tri-State's members' fairly rapid load growth averaging 4% per year, partly reflecting the energy and commodity-based industries in certain of the members' service territories, Tri-State has been in the position of playing catch-up with respect to maintaining adequate power supply to meet load requirements. In the past few years, Tri-State has added several small natural gas-fired peaking units and invested in the third Springerville generating unit that is currently being built, to meet load growth and displace costlier short term power purchases.

However, the load growth has not abated and is projected to continue for the foreseeable future, requiring a longer term power supply fix, employing more baseload generation. In August 2005, Tri-State's Board of Directors approved a comprehensive resource development plan, to bolster the cooperative's power generating and delivery systems for the future. The plan incorporates up to 1,800 MW of coal-based generation and up to 1,000 miles of new transmission lines over the next 15 years.

While Tri-State is in the relatively early stages of this comprehensive power supply plan and enjoys flexibility in the development of these units, it has the potential to be a credit concern as the new infrastructure needs could result in a tripling of Tri-State's outstanding debt. In addition, depending on the wholesale rate impact, Tri-State's members' ability to adequately pass-through Tri-State's wholesale rate increases may be challenged, particularly in Wyoming, where the distribution cooperatives are subject to state regulatory rate review. Fitch will be closely monitoring this evolving credit development.

Tri-State is a taxable, not-for-profit wholesale electric generation and transmission cooperative providing service to 44 member distribution system cooperatives in four states: Colorado, Wyoming, New Mexico, and Nebraska. As of Dec. 31, 2005, Tri-State's power supply mix on an energy basis is predominantly owned coal-fired generation, accounting for 68% of total power resources. The remaining 32% of power supply was purchased, 26% under long term agreements (with WAPA and Basin Electric Cooperative) and the rest (6%) via shorter term purchases. The member systems serve a population of approximately one million predominantly residential, agricultural and small commercial users.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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 are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Apr 11, 2006
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