Bangkok--14 Sep--Standard & Poor's
Standard & Poor's Ratings Services has assigned its 'AA' rating to the Salt River Project Agricultural Improvement and Power District (SRP, the utility, or the district), Ariz.'s proposed $325 million series 2009B bonds. At the same time, Standard & Poor's affirmed its 'AA' rating on SRP's $3.7 billion of long-term debt, its 'A-1+' rating on the utility's $375 million commercial paper (CP) program, and its 'AA-' underlying rating on the insured $232.6 million of certificates of participation that have a subordinate claim on revenues. The outlook on the long-term ratings is stable.
The 2009B bonds' proceeds will retire about $325 million of the utility's $375 million of CP outstanding. SRP is proposing to retire all of its series B CP, which will leave $50 million of series C CP outstanding. A new revolving credit agreement with U.S. Bank provides $50 million of liquidity support for the CP and SRP pledges to maintain CP balances within the limits of the liquidity facility's available capacity. The note resolution otherwise allows for up to $475 million of CP.
"In our opinion, the long-term ratings reflect the utility's financial flexibility flowing from autonomous ratemaking authority and competitive rates," said Standard & Poor's credit analyst David Bodek.
Offsetting credit factors include rate increases that are not keeping pace with rising operating and debt service costs as 2009's 1.3x fixed charge, cash basis, debt service coverage shows. Although SRP raised its fuel adjustment rate component by nearly 6% in the middle of fiscal 2009, SRP is not planning base rate adjustments until fiscal 2011, which could potentially add pressure to financial margins.
The stable outlook reflects our expectations that management will manage costs and implement rate adjustments in response to fiscal 2009's weak financial results. However, if SRP actions perpetuate its weak financial performance, by continuing to defer rate actions or through other actions, there could be negative rating implications. We believe that managing the financial and operational elements of the large capital program and variable operating costs will be important in determining creditworthiness.
RELATED RESEARCH
USPF Criteria: "Electric Utility Ratings," June 15, 2007
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
David Bodek, New York (1) 212-438-7969
Paul Dyson, San Francisco (1) 415-371-5079
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280
[email protected]