Moody’s Investors Service rewarded the Omaha Public Power District for a series of recent system upgrades and its near completion of a new coal-fired plant by raising the utility’s senior and subordinated revenue bonds to Aa2 from Aa3.
The outlook for both credits is stable. The upgrade affects roughly $1.6 billion of outstanding debt. Standard & Poor’s rates the district’s bonds AA.
The OPPD, which serves the city of Omaha and 47 other municipalities, recently completed a series of major upgrades to its Fort Calhoun nuclear plant, and is on track to complete construction of a new 660-megawatt coal-fired generation plant. Moody’s analysts also praised the district for its low debt burden and solid financial operations. The utility derives 82% of its retail revenues from sales within Omaha.
The OPPD’s net revenue coverage of total debt service, including subordinate bonds, has averaged nearly two times during the past five years. The $1 billion, bond-funded capital improvement program, scheduled through 2012, will make rate increases necessary to maintain strong margins, analysts said. Rates were increased by 3% in 2006, 2.8% in 2007, and 4% in 2008. However, the OPPD is still among the lowest cost energy providers in the region.
The system’s strong financial position has been maintained in part through the diversity of its fuel mix — coal makes up two-thirds of its energy and nuclear just under a third, with oil and gas making up the rest. With three main generating units, including the nuclear facility, it also owns almost all of its own generation. The Nebraska City Station 2 coal-fired general plant is scheduled to open in 2009 and is expected to increase sales.
Challenges to the credit include stricter emissions regulations and the costs of upkeep to Fort Calhoun’s nuclear power plant as it ages, analysts said.
