Moody’s Investors Service last week said the Wisconsin Public Power Inc.’s A1 rating would not be affected by its proposal to purchase the electric distribution assets of Menasha’s steam utility plant. The WPPI has $422.7 million of rated debt.
Moody’s has downgraded the city’s combined utility enterprise rating to Baa3 with a negative outlook from A3. “Moody’s believes that the downgrade of the electric utility and the proposed purchase will have minimal impact on WPPI’s overall credit position due to the negligible impact on WPPI’s participants’ weighted average credit quality, its sound liquidity position, the relatively small size of the acquisition, and the satisfactory security provided by the proposed lease agreement with the city,” analysts wrote.
Menasha — the second largest member of WPPI — defaulted last September on $24 million of steam revenue bond anticipation notes that carried the city’s appropriation pledge. The utility has proposed purchasing the city’s electric distribution system and its ownership interests in the American Transmission Co. for $18.2 million. It would then lease the system back to the city for a 20-year term.
The funds would go to repay bondholders. WPPI would finance the purchase with available cash. The transaction requires regulatory and voter approval, and a referendum is expected in April.
In the event of a default on the proposed lease agreement with Menasha, Moody’s said it believes WPPI would be well-positioned to step in and maintain operations of the distribution system with minimal revenue interruption.