Moody's Investors Service said it has upgraded Moorhead Public Service, Minn.'s outstanding senior lien utility revenue bond rating to Aa3 from A1 and junior lien revenue bond rating to A1 from A2.
Moody's has also assigned the Aa3 rating to Moorhead's $6.6 million public utility revenue and refunding bonds, Series 2012E. Post-sale, the utility will have about $27 million in senior lien debt and $795,000 in junior lien debt outstanding.
The upgrade reflects the utility's improved financial position that is expected to remain strong, strong management and long-term planning with demonstrated willingness to maintain financial margins, and continued stable regional economic performance and growth despite a global and national slow down.
The Aa3 senior lien rating incorporates the Moorhead Public Service's modestly-sized service area bordering Fargo (GO rated Aa1), N.D., with some customer concentration; strong financial operations despite large operating transfers to the city of Moorhead (GO rated Aa3); low cost power supply mix; and low leverage.
The A1 junior lien rating reflects the subordinate pledge, despite near identical coverage ratios as the senior lien debt. The lack of an automatic purchased power cost adjuster in its rates is offset by management's annual rate increases and ability to adjust rates mid-year. Finally, the rating accounts for MPS' moderate exposure to environmental regulations associated with coal-fueled power sources given its participation in MRES.