Standard & Poor's Ratings Services said it raised its rating on Oak Ridge, Tenn.'s electric system revenue debt one notch to A from A-minus.
The outlook is stable.
The upgrade reflects Standard & Poor's assessment of the system's strong financial performance, evidenced by its maintaining very strong debt service coverage equal to at least 2.7x since 2009.
"We believe Oak Ridge will likely maintain its strong net margins and structurally sound finances. We also believe strong margins and lower operational and financial risks associated with being a Tennessee Valley Authority distributor somewhat mitigate our concerns over, what we consider, the system's low working capital, which is beginning to increase," said Standard & Poor's credit analyst Scott Sagen. "Due to the system's stable customer base and, what we regard as, strong financial profile, we do not believe rating mobility exists over the outlook's two-year period."
The rating reflects Standard & Poor's opinion of the system's general creditworthiness, including its: role as a distributor of competitively priced Tennessee Valley Authority power and energy, which greatly reduces financial and operational risk; and moderate additional capital requirements.
Standard & Poor's believes factors that moderate these strengths include the system's: low operating cash reserves that are beginning to increase; and concentration in the electric system's customer base, both in terms of revenue and employment related to the U.S. Department of Energy's Oak Ridge National Laboratory and related industries.
A first-lien net revenue pledge of the city's electric distribution system secures the bonds.