Moody's Investors Service said it upgraded the ratings on the Lakeland, Fla., electric enterprise revenue bonds to Aa3 from A1.
Concurrent with the rating upgrade, Moody's revised the rating outlook to stable from positive.
The rating actions reflect the system's sound debt service coverage metrics, a steadily improving trend for its liquidity and debt ratio over the past few years, and the expectation that financial performance will strengthen further in the next several years.
The rating actions also reflect the system's effective management of its diversified power supply portfolio to meet electricity demands from a sizable and diverse customer base which increased by about 1.4% during fiscal year 2013, after falling slightly during the preceding three years owing to the lingering effects of the recession.
The rating actions recognize management's and the City Commission's demonstrated willingness to exercise base rate autonomy and routinely adjust for variable costs of service (i.e., fuel) as necessary to achieve financial goals while maintaining a good competitive electric power cost structure versus peers in Florida.
The system does not have base load capacity needs for the foreseeable future, so capital expenditures should be mostly internally funded and allow for continued improvement in the debt ratio. Moreover, the system amended its bond ordinance in 2012 to include stronger rate covenants that are more traditional for this sector.
