Standard & Poor's Ratings Services said it has raised its rating on Berkshire Municipal Wind Power Cooperative Corp., Mass.'s (Berkshire, or the cooperative) wind project revenue bonds to A from A-minus.
The outlook is stable.
"The upgrade reflects our assessment of strengthened credit quality of the project participants," said Standard & Poor's credit analyst Jeffrey Panger.
The rating primarily reflects the following:
- A take-or-pay power sales contract (PSC) between Berkshire and the Massachusetts Municipal Wholesale Electric Company (MMWEC), and take-or-pay power purchase agreements (PPAs) between MMWEC and 14 of MMWEC's 28 member municipal light departments (the participants, or participating members). The project is fully subscribed.
- The PPAs require up to a 25% step-up for nondefaulting participants within the project, if other participants default.
- Standard & Poor's criteria for rating joint action agencies with fewer than 25 participants, which dictate that we assess the credit quality of the participating members, focusing on the weakest credit profile among the strongest participants aggregating to 80% of the project (that is, satisfying the 25% step-up).
The bonds are secured by revenues derived from a take-or-pay PSC between Berkshire and MMWEC. Concurrently, MMWEC has entered into take-or-pay PPAs with 14 participating member municipal light departments.
Under the PPAs, the participating light departments are obligated to make payments sufficient to cover all of MMWECs costs related to the project, including 110% of the amount required for debt service. The obligations under the PPAs are considered operating expenses of the participating light departments. Under the PSC, MMWEC is obligated to make such payments to the cooperative.
The rating agency believes it is important to note that the PSC and PPAs are take-or-pay obligations that are not conditioned upon performance of the cooperative under the PSC.
The stable outlook reflects the diversity of the participating membership, their rate-setting autonomy, and the strength of the take-or-pay obligations under the PSC and the respective PPAs.
