Fitch Ratings has affirmed the 'A' rating on the following Old Dominion Electric Cooperative (ODEC) outstanding secured bonds:
--$60,210,000 Halifax County Industrial Development Authority (VA)
exempt facility refunding revenue bonds, series 2002;
--$177,081,000
first mortgage and indenture bonds, 2003 series A;
--$212,500,000
first mortgage and indenture bonds, 2002 series B.
In addition, Fitch has assigned an implied senior unsecured rating of 'A' to ODEC. The rating is implied because none of the unsecured debt is publicly held.
The Rating Outlook is Stable.
SECURITY
The senior secured obligations are secured by a mortgage interest in substantially all of ODEC's tangible and certain of its intangible assets.
KEY RATING DRIVERS
SOLID FINANCIAL PERFORMANCE: ODEC provides wholesale power to cooperatives in Virginia, Delaware and Maryland. Financial metrics are sound, with ODEC's debt service coverage (DSC) above 1.20 times (x) and equity to capitalization around 30%.
AMPLE LIQUIDITY: A new $500 million credit facility will be used to provide added liquidity as needed to supplement operating cash flows, to cover short and medium-term funding needs and meet required collateral postings under power purchase agreements.
BALANCED POWER SUPPLY: ODEC's generation portfolio is diverse, consisting of an ownership share of the North Anna nuclear station (units 1 & 2), interest in coal and natural gas-fired generation and a sizeable amount of power purchases. The utility's long-term strategy is to meet member energy needs with a balance of owned generation and purchase contracts.
WITHDRAWAL FROM NORTH ANNA: In 2007, ODEC filed a joint application with Virginia Power at the Nuclear Regulatory Commission (NRC) for a license to construct North Anna 3. After considerable due diligence, in February 2011, ODEC announced that it would not be participating in construction of the nuclear unit. ODEC finalized its exit from the project in December 2011.
DEPARTED LOAD REPLACED: While ODEC no longer serves Northern Virginia Electric Cooperative (NOVEC), formerly its largest distribution member, the subsequent addition of 102,000 new customers in northwestern Virginia from Potomac Edison, has largely eliminated the effect of NOVEC's loss.
CREDIT PROFILE
ODEC provides wholesale power to its 11 electric distribution cooperative members pursuant to long-term, all-requirements wholesale power contracts. ODEC provides its member systems power and energy requirements through a combination of owned coal, nuclear and natural gas-fired generating facilities and purchase power contracts.
As a result of the termination of NOVEC's wholesale power contract in December 2008, and with the addition of the customers previously served by Potomac Edison, as of Dec. 31, 2011, ODEC served more than 550,000 retail electric customers, representing a total population of about 1.2 million people.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Revenue-Supported Rating Criteria and U.S. Public Power Rating Criteria, this action was informed by information from CreditScope.
Applicable Criteria and Related Research:
--'U.S. Public Power
Rating Criteria', Jan. 11, 2012;
--'Revenue-Supported Rating
Criteria', June 20, 2011;
Applicable Criteria and Related Research:
U.S. Public Power Rating
Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=665815
Revenue-Supported
Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130
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