BRADENTON, Fla. - Kentucky's Paducah Power System plans to drop Fitch Ratings after getting a higher rating from Standard & Poor's.
Fitch downgraded Paducah's revenue bonds to BBB from A-minus in December after the utility presented a financial and rate recovery plan required largely because of its ownership in the controversial Prairie State coal plant in Illinois, which has been more costly than anticipated.
On March 16, Standard & Poor's gave PPS a first-time, A-minus issuer credit rating, and assigned the A-minus to Paducah's 2009A and 2010 electric system revenue bonds. S&P said the outlook is stable.
"This is very good news for us," said Gary Zheng, who was hired as PPS' general manager on Jan. 26. "The rating sends a message of confidence to the vendors we do business with, and to potential business partners who may be interested in buying or leasing our excess power generation."
Zheng said PPS traditionally obtained ratings from Fitch and Moody's Investors Service. The utility decided recently to maintain ratings with Moody's and S&P, which also rate the Kentucky Municipal Power Agency, a joint action agency that Paducah and Princeton Electric created to finance a 7.82% ownership in Prairie State. Paducah's share of the KMPA investment is 83.9%.
On March 2, Moody's downgraded Paducah's bonds to Baa1 from A3 in anticipation of a refunding designed to relieve some of the payments owed by the two utilities, and maintained a stable outlook.
The action reflected Paducah's weaker financial profile because of increased debt service obligations, weakened liquidity, and higher expenses related to Prairie State, Moody's said.
Zheng said that Moody's one-notch downgrade was more favorable than Fitch's two-notch downgrade to BBB.
"We felt as if the Moody's decision showed confidence in our rate recovery plan," he said, adding that S&P's rating also supports the utility's financial improvement plan.
KMPA refunded $210.62 million of bonds on March 17 for a net present value savings of $6.47 million or 3.03%, according to chief financial officer Heather Overby. The refunding bonds were insured by National Public Finance Guarantee Corp.
