Springfield Electric Fizzles

Standard & Poor’s downgraded its rating on Springfield’s electric system revenue bonds by two notches to A and warned of further action by assigning a negative outlook.

The rating previously was AA-minus. The drop follows a rate-covenant violation due to diminished debt-service coverage of bonds issued for Springfield’s City Water, Light & Power system.

CWLP continues to suffer from weak liquidity as margins from wholesale sales have fallen far short of budgeted levels. “The negative outlook reflects our opinion of weak liquidity and the potential for further weakening if a material adverse change in credit quality prompts the line of credit provider to call for repayment of outstanding monies and terminate the line,” S&P analysts said.

The system benefits from an area with a diverse economy, anchored by the state capital, a solid customer base, and good management. CWLP has significant excess power and normally used margins on wholesale sales to avoid rate hikes. Plummeting natural gas prices and surplus capacity have strained the system. The city has $622 million of electric senior-lien revenue bonds.

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Illinois
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