Moody’s Investors Service placed $6.7 billion of Aaa-rated municipal debt backed by the federal Bonneville Power Administration under review for possible downgrade Wednesday. 

The Aaa rating on Energy Northwest’s revenue bonds is rooted in the legal arrangements between the company and BPA that secure the bonds. The administration pays debt service on revenue bonds tied to three projects, according to Moody’s.

The credit agency said the rating is under review for possible downgrade because of sustained decline in the BPA’s financial reserves available for risk and debt-service-coverage ratios. Analysts said the power provider’s proposed rates, low market prices, and below-average hydrology have also contributed to the concerns.

Moody’s added that above-average hydrology will likely result in the BPA performing above its budget for fiscal 2011. However, analysts don’t expect a major improvement in reserves and non-federal debt service coverage.

To a lesser extent, Moody’s said, the review for possible downgrade also reflects a small degree of uncertainty regarding the BPA’s ability to draw on its U.S. Treasury lines of credit.

The downgrade review will likely be concluded after the BPA’s rate plan is approved in the third quarter.

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