BRADENTON, Fla. - Standard & Poor's upgraded wastewater revenue bonds issued by Tennessee's Jackson Energy Authority to AA from AA-minus.
The upgrade impacts $49.3 million in outstanding revenue bonds.
The outlook is stable, S&P said Sept. 5.
"The upgrade is based on the wastewater division's robust financial position, which we view as sustainable even with a likely increase in debt over the next several years," said analyst Theodore Chapman.
The rating is based on the general creditworthiness of JEA's wastewater division, and reflects the sound economic characteristics of the Jackson metropolitan area, a strong operational profile, no regulatory concerns, limited growth-driven pressures, and the strong management of the system as well as a demonstrated willingness to adjust rates, he said.
The bonds are secured by a senior-lien pledge on the net revenues of JEA's wastewater division.
The division's "strong" financial profile in fiscal 2013 includes debt service coverage of 2.7 times by S&P's calculation.
Some $6.9 million in unrestricted cash was equivalent to roughly 270 days of operating expenses.
"While JEA did not raise rates in fiscal 2013, management did put in place a 3.5% increase in fiscal 2014 as some borrowing is planned for the next several years," Chapman said.
The city of Jackson is about 90 miles northeast of Memphis in western Tennessee, and serves as a regional economic hub for Madison County and surrounding areas.
The Jackson economy remains stable, despite a relatively large manufacturing presence, according to S&P.
JEA is an integrated utility providing electric, gas, water, sewer, and telecommunications services to a population of about 68,000.
In addition to wastewater, Jackson Electric has four other divisions that operate with separate finances, and any outstanding municipal debt is secured solely by the net revenues of each division.
As of June 30, 2013, the telecom division had $58.8 million in outstanding bonds, the drinking water division had $34.6 million in debt, the gas system had $29.65 million in bonds outstanding, and the electric system had $34.45 million in debt.
The Tennessee Valley Authority provides the electric system's power.
In addition to fiber-optic broadband Internet, the telecom division offers digital cable television and telephone services.
Proctor & Gamble is one of the top commercial customers in all but one division.