Utah Muni Power Systems' Central-St. George Bonds Cut to A-Minus by S&P

Standard & Poor's Ratings Services said it has lowered its rating on Utah Associated Municipal Power Systems' (UAMPS) Central-St. George transmission project bonds to A-minus from A-plus.

The outlook is stable.

"The downgrade reflects what we consider to be a trend of very weak financial metrics for the project's leading participant, the electric system of the City of St. George, Utah," said Standard & Poor's credit analyst Jeffrey Panger.

The A-minus rating reflects the following factors: the weak financial results -- including debt service coverage (DSC), fixed cost coverage, and liquidity -- of the leading participant, St George, whose electric system supports 74.38% of operations and maintenance and debt service costs; a transmission services agreement that does not provide for mandatory reallocation of defaulting participants obligation to nondefaulting member, but does provide for a functional unlimited step-up; an expanding service area that has benefited from residential growth in recent years; operating strengths that include access to the utility's power resources; and the transmission assets' high-performing nature.

A net revenue pledge of UAMPS' Central-St. George project secures the bonds.

Four utilities, all in southwestern Utah's Washington County, take transmission from the project: St. George, Santa Clara, Washington City, and Hurricane. Combined, these utilities serve about 42,000 customer connections. The participating utilities have signed agreements with UAMPS, and these govern payments for debt service and operations on a take-or-pay basis.

St. George is the largest of the cities in Washington County, and the largest participant in the project. Its share of debt and operating costs is about 74%. Hurricane and Washington City are about 11% each and Santa Clara is about 4%.

The stable outlook reflects S&P's expectation that St. George's recent rate increase will bolster its financial metrics to a level that support the A-minus rating. Should the city's debt service and fixed cost coverage ratios fail to achieve projected levels, the agency could downgrade the project bonds. Absent substantial improvement in the financial metrics beyond the levels currently forecast, it does not expect to raise the raise the rating on the project bonds over the next two years.

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