Bangkok--23 Feb--Standard & Poor's
Standard & Poor's Ratings Services raised its rating to 'AA' from 'AA-' on Montana Department of Natural Resources and Conservation's outstanding coal severance tax bonds. The outlook is stable.
"The raised rating reflects several years of very strong coverage and coal severance tax collection trends," said Standard & Poor's credit analyst Paul Dyson.
Coverage of future maximum annual debt service by coal taxes alone has been strong historically at no less than 2.55x since 1994 (this was achieved in 2002-2004), but coverage has risen to 5.2x in 2009 from 4.5x in 2007 and 3.0x in 2005. When including loan repayment revenues, coverage has been no less than 3.3x and was a very strong 6x in 2009. According to management, projected coverage for 2010 by coal severance taxes alone is 5.4x, with all-in coverage projected at 6.2x.
Pledged coal severance tax revenues have increased consistently in recent years given increasing coal prices, while production has remained fairly stable at a range of 33 million-38 million tons during fiscals 2004-2009. The state's severance tax rate currently ranges from 3%-15% of value, depending on the type of coal. Coal contract prices bottomed out in 1999 at $6 per ton, but stabilized during 2000-2006 before rising to $7.81 per ton in 2007, $11.56 per ton in 2008, and $12.45 per ton in 2009. The state is forecasting an average price per ton of approximately $13.31 during 2010-2013.
RELATED RESEARCH
USPF Criteria: Special Tax Bonds, June 13, 2007
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Paul Dyson, San Francisco (1) 415-371-5079
Ian Carroll, San Francisco (1) 415-371-5060