CHICAGO — Moody's Investors Service has downgraded Algona Municipal Utility, Iowa's electric revenue bonds by one notch to Baa1, citing its fiscal struggles.
The action Monday comes ahead of the utility's planned sale of $3.7 million of notes. The issue will bring the utility's debt to $16.7 million. The bonds are secured by a first lien pledge on the net revenues of the electric system.
"The downgrade to Baa1 reflects the electric enterprise's weakened financial position, narrow liquidity, and decline in debt service coverage below rate covenant in fiscal 2013," Moody's said.
The rating also reflects the enterprise's limited but stable service area in northern Iowa, industrial customer concentration, unregulated rate setting authority, relatively competitive retail rates despite recent rate increases, and heavy reliance on coal-fired generation. The heavy reliance on coal exposes the utility to air quality emissions regulations and new capital investment, Moody's said.
