Bangkok--27 Sep--Standard & Poor's
Standard & Poor's Ratings Services revised the outlook to positive from stable and affirmed its 'A' long-term and underlying ratings (SPUR) on Northern California Power Agency's (NCPA) outstanding Hydroelectric Project Number One revenue bonds.
"The revision of the outlook to positive from stable follows a similar action on Santa Clara's electric system (doing business as Silicon Valley Power), which was revised to positive from stable earlier in 2011," said Standard & Poor's credit analyst Paul Dyson.
The 'A' rating on the hydroelectric project revenue bonds reflects our assessment of the credit quality of four of the largest and highest-rated project participants and their responsibility to increase their contributions by 25% in the event of a default by another weaker participant.
The 'A' long-term and underlying ratings also reflect our assessment of the competitive economics of the project, which we understand produces lower-cost energy in high-water years and will likely produce competitively priced energy in low water years.
NCPA contracted to finance, manage, construct, and operate Hydroelectric Project Number One for the licensed owner, Calaveras County Water District (CCWD). In return, NCPA has the right to the electric output of the project for 50 years from February 1982. NCPA also has an option to purchase surplus power from the project in excess of the CCWD's requirements for the subsequent 50 years, subject to regulatory approval.
The four highest rated project members account for more than 80% of the hydroelectric project's entitlements; they are:
- Palo Alto (AAA/Stable combined utility rating) with 22.92%;
- Roseville (A+/Stable) with 12%;
- Alameda (A+/Stable) with 10%; and
- SVP (A/Positive) with 35.86% of the hydroelectric project entitlement.
As with NCPA's other rated projects, the credit strengths of the hydroelectric project, in our opinion, include:
- The credit quality of the underlying participants;
- The participants' reliance on the NCPA project for an important component of their energy needs;
- A regulatory environment that maintains the participants' local control over rates and minimal pressure for municipal retail access; and
- Debt service coverage that we consider adequate, which is common for joint-action agencies, although coverage is lower when considering refunds to the members.
RELATED CRITERIA AND RESEARCH
- USPF Criteria: Electric Utility Ratings, June 15, 2007
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:
Paul Dyson, San Francisco (1) 415-371-5079
Peter V Murphy, New York (1) 212-438-2065