CHICAGO - Springfield City Utilities, Mo. will take competitive bids on $515 million of revenue bonds to refund bonds from a 2006 issue that funded a coal plant.
The sale is set for May 20. Public Financial Management Inc. is financial advisor and Gilmore & Bell PC is bond counsel. The Springfield Board of Public Utilities is the formal issuer.
Ahead of the sale, Fitch Ratings affirmed the bonds' AA rating and Standard & Poor's affirmed the utility's AA-plus ratings. Standard & Poor's also affirmed its AA rating on separate appropriation bonds.
"The stable outlook on the ratings reflects our expectation that CU's financial risk profile is likely sustainable in the next two years given management's forward-looking attitude toward rates and the lack of any planned additional borrowing," said Standard & Poor's analyst Theodore Chapman.
The refunding bonds are secured by a senior lien on combined net revenues of the public utility system that includes electric, natural gas, water, transportation and telecommunication systems. The utility serves 111,214 customers.
"The primary purpose of the refunding is to remove the bullet payment at maturity of the series 2006 bonds and provide the utility with level debt service," Fitch said. "In addition, the refunding will provide cost savings, while also removing the debt service reserve fund."
The largest of the utility's services is the electric system, which accounted for 63% of fiscal 2014 revenues.
"Financial metrics have strengthened in fiscal years 2013 and 2014 due to a series of implemented rate increases," according to Fitch. The rebound occurred after a number of years with tightened metrics due to slowed energy sales and increased debt associated with the construction of the new Twitty Energy Center Unit 2, a 300 megawatt unit, according to the rating agency.
Fitch noted that a majority of the electric system's power comes from coal-fired generation, which could pose a challenge for the utility as environmental standards become more stringent.
"Positively, the capital plan includes plant upgrades and conversions to make the utility Mercury and Air Toxics Standards (MATS) compliant in 2015," it added.