Fitch affirms the 'AA-' rating on Georgia Transmission
Corporation's (GTC's) senior secured obligations. The Rating Outlook
is Stable. Fitch also affirms the 'F1+' rating on GTC's $150 million
commercial paper (CP) program, which is a senior unsecured obligation
of GTC and backed by a $150 million revolving line of credit comprised
of various banks (the Agreement). The 'F1+' rating will expire on the
earlier of October 18, 2007, unless such date is extended, or upon any
prior termination of the Agreement.
The primary underpinnings for GTC's strong rating include the strength of the long-term, take-or-pay, joint and several contracts with its members (recently extended through 2040), the value of the secured interest in GTC's transmission assets, and the limited business risk associated with GTC's participation (with Georgia Power, the Municipal Electric Authority of Georgia and the City of Dalton) in the Georgia Integrated Transmission System (ITS).
GTC's financial profile, despite low margins (debt service coverage consistently in the 1.1 times (x)-1.2x range), is viewed favorably by Fitch, due primarily to its substantial liquidity and the ability to set network service rates to recover all costs and produce margins as required under the indenture. Current liquidity consists of cash on hand ($22 million), available lines of credit ($170 million) and commercial paper capacity ($75 million). In aggregate, GTC currently maintains liquidity of over 2.5 years of operating expenses, a level that Fitch believes is more than sufficient to handle the cash flow variations and potential short-term financing needs associated with its business.
Additional support for the rating is provided by GTC's experienced management team, the essential nature of the network service GTC provides to its members and the resulting predictable stream of cash flows to GTC. In addition, Fitch also recognizes the strong financial profile and service territory characteristics of GTC's members.
Credit risks are not material, with the primary concern involving GTC members' procurement of energy to meet their incremental power supply needs above those provided by existing Oglethorpe Power Corporation (OPC) resources (OPC is a related entity, rated 'A' by Fitch, see below). Power supply payments made by the members to GTC for transmission service are made as operating expenses and are on parity with those made to OPC for power supply costs. Fitch has some concern with the potential impact of existing and future supplemental arrangements. Fitch believes this market exposure concern is mitigated by the current financial strength of the member systems, the ability of member systems to raise retail rates and protections built into the existing power purchase contracts. For additional information, please see the OPC credit report dated May 3, 2006, available on the Fitch Ratings web site www.fitchratings.com.
GTC is a not-for-profit cooperative providing network transmission service to 39 Georgia electric distribution cooperatives. GTC's member distribution cooperatives provide electric service to more than 1.5 million customers in the state of Georgia and serve a population of approximately 3.7 million. GTC was formed in 1996 as a result of the restructuring of OPC, whereby the original generation & transmission company was divided into three separate companies, all owned by and serving the 39 members. GTC became the owner of the transmission assets and provides transmission service, OPC continues to supply power to the members, and Georgia System Operations Corporation was formed to manage the operations business.
As a part of the restructuring, GTC assumed responsibility for 16.86% of OPC's pollution control revenue bonds (rated 'A' by Fitch) outstanding at the time. Under the assumption agreement GTC is responsible for the payment to OPC of debt service on the assumed amount. This obligation is secured by a first mortgage lien under the GTC indenture. However, should GTC fail to make payments under the agreement, OPC remains obligated for the full amount of the bonds.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
The primary underpinnings for GTC's strong rating include the strength of the long-term, take-or-pay, joint and several contracts with its members (recently extended through 2040), the value of the secured interest in GTC's transmission assets, and the limited business risk associated with GTC's participation (with Georgia Power, the Municipal Electric Authority of Georgia and the City of Dalton) in the Georgia Integrated Transmission System (ITS).
GTC's financial profile, despite low margins (debt service coverage consistently in the 1.1 times (x)-1.2x range), is viewed favorably by Fitch, due primarily to its substantial liquidity and the ability to set network service rates to recover all costs and produce margins as required under the indenture. Current liquidity consists of cash on hand ($22 million), available lines of credit ($170 million) and commercial paper capacity ($75 million). In aggregate, GTC currently maintains liquidity of over 2.5 years of operating expenses, a level that Fitch believes is more than sufficient to handle the cash flow variations and potential short-term financing needs associated with its business.
Additional support for the rating is provided by GTC's experienced management team, the essential nature of the network service GTC provides to its members and the resulting predictable stream of cash flows to GTC. In addition, Fitch also recognizes the strong financial profile and service territory characteristics of GTC's members.
Credit risks are not material, with the primary concern involving GTC members' procurement of energy to meet their incremental power supply needs above those provided by existing Oglethorpe Power Corporation (OPC) resources (OPC is a related entity, rated 'A' by Fitch, see below). Power supply payments made by the members to GTC for transmission service are made as operating expenses and are on parity with those made to OPC for power supply costs. Fitch has some concern with the potential impact of existing and future supplemental arrangements. Fitch believes this market exposure concern is mitigated by the current financial strength of the member systems, the ability of member systems to raise retail rates and protections built into the existing power purchase contracts. For additional information, please see the OPC credit report dated May 3, 2006, available on the Fitch Ratings web site www.fitchratings.com.
GTC is a not-for-profit cooperative providing network transmission service to 39 Georgia electric distribution cooperatives. GTC's member distribution cooperatives provide electric service to more than 1.5 million customers in the state of Georgia and serve a population of approximately 3.7 million. GTC was formed in 1996 as a result of the restructuring of OPC, whereby the original generation & transmission company was divided into three separate companies, all owned by and serving the 39 members. GTC became the owner of the transmission assets and provides transmission service, OPC continues to supply power to the members, and Georgia System Operations Corporation was formed to manage the operations business.
As a part of the restructuring, GTC assumed responsibility for 16.86% of OPC's pollution control revenue bonds (rated 'A' by Fitch) outstanding at the time. Under the assumption agreement GTC is responsible for the payment to OPC of debt service on the assumed amount. This obligation is secured by a first mortgage lien under the GTC indenture. However, should GTC fail to make payments under the agreement, OPC remains obligated for the full amount of the bonds.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.