North Carolina Eastern Municipal Power Agency Revenue Refunding Bonds Series 2012A-D Rated 'A-'
NEW YORK (Standard & Poor's) April 27, 2012--Standard & Poor's Ratings Services has assigned its 'A-' rating to North Carolina Eastern Municipal Power Agency's (NCEMPA) power system revenue refunding bonds series 2012 A, B, C, and D. At the same time, Standard & Poor's affirmed its 'A-' rating on the agency's parity debt. The outlook is stable. Debt outstanding is $2.1 billion. "In part the rating reflects our view of the gradual strengthening of the financial risk profiles of both NCEMPA and its 32 member municipal utilities, as continuing debt reduction improves margins and limits the need for base rate increases," said Standard & Poor's credit analyst Judith Waite. The rating also reflects our assessment of the following factors:
- Strong take-or-pay contracts, which extend through 2032 and obligate member cities to pay agency debt service and allows the agency to adjust rates as needed to recover purchased power rates;
- Solid operating performance of Progress Energy Carolina's (PEC) generating assets, which provide all of NCEMPA's power supply;
- The extension through 2031 of the supplemental power supply agreement with PEC, which provides energy at a system average rate competitive with power supply costs in the southeast U.S.; and
- Financial oversight and political support from the Local Government Commission (LGC) of North Carolina.
We understand that proceeds will refund some maturities of revenue bond series 1986, 1993B, and 2003 C, D, and F; and finance about 50% of 2012-2014 capital additions. NCEMPA is a joint-action agency, based in Raleigh, N.C., that provides wholesale power to 32 member cities under take-or-pay contracts. As part of its initial project, the agency purchased ownership interests in three nuclear and two coal-fired generating units PEC operates. The stable outlook reflects Standard & Poor's expectations that NCEMPA will continue to derive strength from the existing structure from the all-requirements contracts and LGC's oversight, the lack of deregulation in North Carolina, and the renewed supplemental agreement with PEC. The rating reflects our assessment of the potential for economic strengthening of the service territory of the agency's member electric utilities, as well as their improving competitive position after debt reduction. We do not expect to raise or lower the rating during our two-year outlook horizon. RELATED CRITERIA AND RESEARCH USPF Criteria: Electric Utility Ratings, June 15, 2007
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| Primary Credit Analyst: | Judith Waite, New York (1) 212-438-7677; judith_waite@standardandpoors.com |
| Secondary Contact: | Jeffrey Panger, New York (1) 212-438-2076; jeff_panger@standardandpoors.com |
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