Standard & Poor’s last week lowered its underlying rating to B on $29.3 million of power revenue bonds issued by Independence County in 2004 for Independence County Hydroelectric.
The proceeds funded an 11.1 megawatt hydroelectric project on the White River that included three power generation facilities in existing lock and dam structures.
The bonds are insured by ACA Financial Guaranty Corp., which Standard & Poor’s rates at CCC. The bonds were originally given an underlying rating of BB-plus, but were downgraded to BB-minus in early March.
The agency put the bonds on negative watch in early April after flooding from heavy rains resulted in minor damage to generating equipment. The high water also stopped work on an expansion project that would raise the level on one dam by three feet to provide additional generating capacity.
The expansion effort was to be completed by early April. However, the need to impound additional volumes of rain means the higher-than-normal water level will not be low enough to allow work in the dam for another five months.
The nearby city of Clarksville has agreed to purchase electricity from the project under a 32-year contract. Independence County is asking Clarksville for an advance payment to meet debt service due on May 1.
Standard & Poor’s said it lowered the credit rating because while the county has sufficient funds to cover the $1.3 million debt service payment due May 1 on the senior bonds, it cannot cover the approximately $700,000 of scheduled debt service on unrated subordinate bonds.
