DALLAS - The Sam Rayburn Municipal Power Agency, whose East Texas service area was hard hit by Hurricane Ike, came through the storm with its low investment-grade rating intact, according to Fitch Ratings.
Fitch analysts maintained its BBB-minus and a stable outlook on the wholesale electricity provider's $166 million of Series 2002 power system revenue refunding bonds. Standard & Poor's maintains the same rating, and Moody's Investors Service last rated the debt Baa2 in September 2006.
The ratings are based on the creditworthiness of Liberty, Jasper, and Livingston, three member cities that secure the debt. The municipalities, within 75 miles of each other, treat their obligations to the agency as operating expenses of their own retail utility systems.
Fitch said its rating "also takes into account SRMPA's large debt burden."
"The general credit characteristics of these three electric systems include small customer bases, with below-average wealth indicators, and limited financial flexibility," analysts wrote. "Each system has between 3,306 and 4,448 customers and historically low to flat sales growth."
While the major effects of the storm were felt in the population centers of the Houston-Galveston area, smaller cities also suffered severe damage when Ike came ashore.
Jasper and Livingston were only out of power a short period of time, while Liberty, closer to the Gulf Coast, was without power for a week. City utility officials were able to assure analysts that they would meet the projected debt service coverage target of 1.1 times this year.
"SRMPA's board has experience in dealing with unexpected costs due to storm damage and would implement an additional rate adjustment if necessary," Fitch noted.
The agency relies on transmission lines from New Orleans-based Entergy Corp., an investor-owned utility.
In September 2005, Hurricane Rita caused damage to Entergy's transmission system in eastern Texas and to the distribution systems of the three members. Electric service to Liberty and Livingston was restored in only a few days, while service to Jasper was restored within two weeks.
"SRMPA's financial performance was not affected due to a mid-year, 8% rate adjustment in fiscal 2006 to compensate for higher costs due to lower hydroelectric generation and lost revenues due to the outages," Fitch said.
Houston's investor-owned utility CenterPoint saw two million customers lose power and is still in the process of restoring electricity.
Texas Lieut. Gov. David Dewhurst estimated the damage from Ike at $11.5 billion. In Galveston, 10,000 to 20,000 residents lost their homes, officials said.
Houston's Reliant Energy Inc., one of the state's largest electricity providers, said that it is looking for a buyer due to the combination of the hurricane and the crisis in the credit market.
Gov. Rick Perry cited the hurricane as a factor in the state's increased jobless claims.
