CHICAGO — The Missouri Joint Municipal Electric Utility Commission won upgrades from two rating agencies for debt issued for the Plum Point coal-fired power plant ahead of a planned $200 million refunding.
The sale will advance refund debt sold in 2006 to finance the utility's share of construction costs for the 148-megawatt Plum Point Energy Station located near Osceola, Arkansas. Wells Fargo Securities and JP Morgan are senior managers.
The public power agency owns a 22.1% share in the plant that began operating in 2010. The utility anticipates net present value savings of about 7.5%.
The bonds are secured by net project revenues that primarily come from seven unit power purchasers located in Missouri and Arkansas, and the 35 members of the Missouri Public Energy Pool No. 1. The utility is a joint power agency that serves 67 municipal retail electric systems.
Ahead of the issue slated for the week of Nov. 10, Standard & Poor's raised its rating by two notches to A-minus from BBB and Moody's Investors Service lifted its rating one level to A2 from Baa1. Both assigned a stable outlook. The ratings impact a total of $314 million of debt. Fitch Ratings affirmed the bonds' A-minus rating and stable outlook.
"The upgrade is based on our view of the improved credit quality of the project's participant cities, which is most crucial to the overall credit quality of the structure," said Standard & Poor's analyst Theodore Chapman.
Moody's said its two-notch upgrade is also due to the improving credit profile of the Plum Point Project participants that have an A3 weighted average credit quality. The credit also benefits from the resolution of multiple commissioning issues.
Plum Point's operating performance was hurt by a series of two scheduled and three forced outages since start-up that kept the plant offline for about one-third of 2013. A scheduled 2014 spring outage was cancelled due to good operating performance, but a midyear electrical issue took the plant offline for an additional 80 days. The next scheduled outage is Nov. 29 to Dec. 12. Planned outages in 2015 and 2016 are each for just two weeks.
"Sustained performance improvements that ultimately benefit the MJMEUC participants through a lower cost of project power, as expected, could contribute to positive rating action," Fitch wrote.
The 2015 forecast cost of power is in line with earlier estimates at $50.01 per megawatt hour. This follows a spike in the 2013 and 2014 costs to $58.95 and $60.76, respectively, due to the outages.
"MJMEUC believes that the unit's state-of-the-art emission control technology should benefit long-term rate stability," Fitch wrote.
Moody's said its rating "incorporates MJMEUC's proven strategic planning for its members' power needs and the sound project participant unit purchase contracts." Narrow debt service coverage of up to 1.15 times, typical for take-or-pay joint action agency projects, and adequate project level liquidity is expected to continue, Moody's added.