BPA has no direct capital markets debt, but has entered agreements that we understand require it to treat debt service on $6.2 billion of nonfederal debt as an operating expense ahead of servicing $6.9 billion of federal debt. Although ENW’s bonds are subordinate ENW obli- gations, ENW covenanted to close the prior lien. Closed-lien, senior debt repre- sents less than 8% of nonfederal debt.
BPA’s nonfederal obligations include: ■ $5.9 billion of ENW revenue and
refunding bonds; ■ $122.4 million of Public Utility
District No. 1 of Lewis County, Wash., Cowlitz Falls Project bonds;
■ $119.6 million of Northwest Infrastructure Financing Corp. (Schultz-Wautoma project) bonds;
■ $22.8 million of Northern Wasco Public Utility District, Ore. (McNary Dam Project) bonds;
■ $13.7 million of conservation and renewable energy system bonds; and
■ $8.1 million of Tacoma, Wash., con- servation system project bonds. The stable outlook reflects our view
that Bonneville’s standalone credit profile could withstand even the possi- bility of some further negative rating actions on the federal government’s sovereign ratings, if such actions were to occur. Also, we think the nearly 8% average rate increases established in BPA’s recently concluded rate pro- ceeding covering the two fiscal years beginning in October 2011will help address recent years’ erosion of debt
service coverage and liquidity due to weak hydrology conditions and soft wholesale power markets. We expect that the rating could be lowered if BPA continues producing cash basis cov- erage of federal and nonfederal obliga- tions below 1x, as it did in 2009 and 2010, and its robust liquidity cushion continues to erode. CW
49 www.creditweek.com
features special report
Standard & Poor’s RatingsServices lowered the long-termrating on Tennessee Valley Authority by one notch, to ‘AA+’ from ‘AAA’. At the same time, we removed the rating from CreditWatch with nega- tive implications. The outlook is nega- tive. The rating action reflects the inter- play between our rating on the United States of America (AA+/Negative/A-1+) and TVA’s ‘aa-’ stand-alone credit pro- file. Because the U.S. government rating
is now ‘AA+,’ we have reduced the uplift TVA’s ‘aa-’ stand-alone credit profile receives under our government-related entities criteria. Nevertheless, the contin- uing ratings uplift reflects our opinion that there is an extremely high likeli- hood that this corporation, which is wholly owned by the U.S. government, would receive extraordinary federal sup- port in the event of financial distress.
As of March 31, 2011, the Knoxville, Tenn.-based authority had $26.2 billion
of debt and other financing obligations outstanding, including statutory debt, energy prepayment obligations, lease- leaseback transactions, and other obli- gations. Management has recorded an estimated charge of $1.1 billion for expected cleanup and related costs attributable to the December 2008 Kingston coal ash spill in Tennessee.
“The negative outlook reflects the outlook of the United States as TVA’s sponsoring sovereign,” said credit ana- lyst Theodore Chapman. “While we note that the stand-alone credit profile of TVA is not without challenges, both financial and operational, we do not currently believe these challenges meas- urably pressure the stand-alone credit profile during our outlook horizon of the next two years.” CW
Tennessee Valley Authority Rating Lowered To ‘AA+’ After U.S. Downgrade; Outlook Is Negative
Analytical Contacts:
Theodore Chapman Dallas (1) 214-871-1401
David Bodek New York (1) 212-438-7969
For more articles on this topic search RatingsDirect with keyword:
Tennessee Valley Authority
Analytical Contacts:
David Bodek New York (1) 212-438-7969
Theodore Chapman Dallas (1) 214-871-1401
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Northwest