Fitch Ratings assigns an 'AA' rating to the Orlando Utilities Commission's (OUC) $150 million utility system revenue bonds, series 2009A. Fitch also affirms the 'AA' rating on outstanding utility system revenue bonds. The Rating Outlook is Stable.
Proceeds from the 2009A fixed-rate bonds will be used to fund capital projects including the completion of OUC's 300 megawatt combined cycle gas unit, which is expected to be completed by January 2010. The bonds are expected to price on April 30, 2009.
Supporting the 'AA' rating are OUC's strong operating position, efficient generating portfolio and competitive retail electric rates. Additional support for the rating is provided by OUC's strong financial profile, characterized by solid cash flow, liquidity, and prudent debt policy.
OUC has 148 days of unrestricted cash, which is comparable to other utilities in the rating category. However, Fitch notes that there is a declining trend in cash balances. The decline in cash is of particular concern to Fitch as the utility posted collateral on uneconomic interest-rate swaps and it has no additional sources of liquidity such as a line of credit. Fitch will monitor OUC's progress to increase its cash balance with planned base rate increases from 2009-2013.
Additional credit concerns center on OUC's ability to maintain a reasonable level of transfer payments to the city of Orlando. Fitch views favorably the agreement between the city and OUC that establishes specified payments through 2011.
Fitch will monitor the following key credit drivers, which could affect the rating:
--Maintenance of financial metrics in line with the rating category (i.e. debt service coverage and liquidity);
--Maintenance of a reasonable level of transfer payments given weaknesses in the Florida economy.
OUC is a combined municipal utility providing electric and water service within the city of Orlando, the neighboring city of St. Cloud and adjoining portions of Orange County, FL. The electric utility serves approximately 203,800 customers. Revenues are contributed from the electric system (86%), water system (10%) and other (4%). For further details on OUC, an updated report on the utility will soon be available on the Fitch Ratings web site at www.fitchratings.com.
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.
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Fitch Ratings, New York
Yvette Dennis, 212-908-0668
William
Drake Richey, 212-908-0325
or
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Email: cindy.stoller@fitchratings.com