Fitch Ratings last week upgraded the Piedmont Municipal Power Agency to BBB-plus from BBB, affecting $1.2 billion of electric revenue bonds.
Fitch analysts cited an increased value for nuclear power versus less environmentally friendly sources of fuel, consistently good operating performance, and favorable production costs. PMPA has good liquidity, which is bolstered by a sizeable rate stabilization fund. Service area characteristics remain below average, but continue to improve, aided by solid customer growth and a broadening out of local industries, according to Fitch.
PMPA is a joint-action agency that provides wholesale power to 10 cities in northwestern South Carolina. Its power supply is primarily derived from an ownership interest in Catawba Nuclear Unit No. 2. The historical BBB rating largely reflects the agency’s substantial amount of outstanding debt and financial leverage associated with the nuclear facility, above-average wholesale electric rates, and extended debt schedule, Fitch said.
Analysts pointed to a degree of plant concentration risk, with the primary power supply coming from two nuclear power stations and the rest from contracted supplemental purchases. Wholesale electric rates are still above those of Duke Energy, the primary electric supplier in the region, and moderate annual rate increases will be necessary for the foreseeable future.
Fitch noted that about 30% of PMPA’s debt is variable rate and the bond maturity schedule is lengthy, extending through 2034.