Bangkok--15 Aug--Standard & Poor's
Standard & Poor's Ratings Services has assigned its 'AA' rating to City of Colorado Springs, Colo.'s utilities system revenue bonds series 2011A. The bonds will be fixed-rate and are secured by a pledge of net revenues of Colorado Springs Utilities' (CSU) electric, gas, water, wastewater, and streetlight systems. At the same time, Standard & Poor's affirmed its 'AA' rating on CSU's parity debt outstanding. The outlook is stable.
"The rating reflects our view of city council's willingness to set rates that provide strong debt service coverage, competitive rates in each of its four utility systems, and a stable regional economic base," said Standard & Poor's credit analyst Judith Waite.
Credit metrics weakened from 2008-2010, but management is targeting annual rate increases of 6% to the typical residential bill, which includes all four services, excluding fuel-related costs, in the next five years to finance its capital needs and maintain its fixed cost ratio and debt service coverage (DSC) at levels appropriate for the rating. It expects the rate increases, combined with a gradual increase in volumetric sales, to raise DSC--after payment in lieu of taxes to the city--to about 2x in 2012 and beyond.
Bond proceeds will refund series 2001A and 2003A bonds.
CSU is an enterprise fund of Colorado Springs. The utilities provide electricity, gas, water and wastewater services to customers the city, Manitou Springs, and many of the residential suburban areas around the city. The military installations of Fort Carson, Peterson Air Force Base, and the United States Air Force Academy receive water and electric service and gas supply and transportation, and Peterson Air Force Base also receives wastewater treatment service. Despite the recession, each service experienced moderate (less than 1%) customer growth in 2008 and 2009. In 2010, electric customers numbered 211,495 meters, gas meters totaled 187,532, water meters totaled 134,151, and wastewater accounts numbered 130,716.
The stable outlook reflects Standard & Poor's expectation of continued strong financial performance. The rating and outlook depend on the system maintaining strong coverage and liquidity levels. The utilities are undertaking a substantial capital plan in the next decade, with accompanying increased leverage. As such, adherence to management's financial projections, including its capital structure, debt service, and fixed charge coverage levels, along with rising-but-manageable user charge levels, is critical to maintaining the 'AA' rating.
RELATED CRITERIA AND RESEARCH
USPF Criteria: Electric Utility Ratings, June 15, 2007
USPF Criteria: Key Water And Sewer Utility Credit Ratio Ranges, Sept.15, 2008
USPF Criteria: Standard & Poor's Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue Bonds, Sept. 15, 2008
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Ola Fadahunsi, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Judith Waite, New York (1) 212-438-7677
Peter V Murphy, New York (1) 212-438-2065