NEW YORK - Moody's Investors Service said it has upgraded the revenue bond rating of the Southeast Alabama Gas District (SEAGD) to A2 from A3. The district has approximately $67 million of rated general system revenue bonds outstanding. The outlook is stable.
The A2 rating reflects the importance of gas production revenues as a majority of the district's net revenue; competition faced by the district for industrial customers; strong management of gas supply through diversification of sources; flexible rate making policies and a history of stable financial metrics.
The upgrade is based on improved credit metrics caused by outperformance of the district's gas properties which has allowed an accumulation of restricted cash to meet the early maturity of Series 2003 bonds, cash funding of capital improvements that have improved the transmission and distribution system, and effective hedges that provide substantial margins on gas production through 2015.
The stable outlook is based on the ability of district to maintain coverage levels at historically low natural gas prices, ample levels of liquidity and continued economic recovery in the service area.