Moody's Investors Service said it has downgraded Miami-Dade County, Fla.'s solid waste system revenue bonds rating to A3 from A2.
The outlook has been revised to stable.
This action concludes the review for downgrade that was initiated on May 27, 2015.
The downgrade is prompted by the projected decrease in debt service coverage driven by the expiration of the substantially above-market power purchase agreement (PPA) that is resulting in much lower electricity sales revenue.
Recent rates in Florida for electricity sales have ranged from $30-$40/MWh, far below the substantially above-market previous contract price of $84/MWh. Power prices are closely correlated with price of natural gas and we do not see material increases in natural gas prices over the next several years.
The county has been awarded a portion (15 MW) of the city of Homestead's RFP for power supply resources, however the contract will not commence until January 2020.
The system also faces the potential loss of several municipal customers that have not yet renewed interlocal agreements (ILAs) that expire October 1, 2015. Additionally, the enterprise will utilize unrestricted cash balances to fund the near-term capital program, which will pressure liquidity downward of the next few years.
The A3 rating incorporates the large size of the system, the high proportion of revenues that are paid through disposal and collection fees, and the currently adequate cash balances.
