"IF YOU DON'T KNOW ME BY NOW" harold melvin & the blue notes
NEW YORK-- Fitch Rating assigns an 'A' rating to the following American Muncipal Power, Inc. (AMP) Prairie State Energy Campus (PSEC) project revenue bonds:
--$534.9 million Prairie State Energy Campus project revenue bonds, refunding series 2015A;
--$246 million Prairie State Energy Campus project revenue bonds, refunding series 2015B (B1,B2, B3)
The bonds are expected to price on Dec. 16, 2014. Proceeds willed be used to advance refund portions of the AMP PSEC's outstanding series 2008A and 2009A bonds. In addition,Fitch affirms AMP PSEC's outstanding $1.7 billion Prairie State Energy Campus project revenue bonds at 'A'.
The Rating Outlook is revised to Negative from Stable for all bonds.
SECURITY
The bonds are secured and payable from gross receipts including payments made by the PSEC participants under the power sales contract and other funds established pursuant to the indentured. AMP has covenanted under the indentured to set participant rates at a level sufficient to generate 1.1xdebt service coverage on the PSEC project bonds.
KEY RATING DRIVERS
WEAKENED PARTICIPANT FINANCIAL METRICS: The negative outlook refects weakened fiscal 2013 metrics for several of the 21 largest projects participants which together represents 80.8% of project capacity. A key credit concern is the meaningful deterioration exhibited by four of the top six participants - Hamilton, Cleveland, Piqua, and Celina. In particular, a delay in implementing needed rate increases to recover higher purchased power costs may have contributed to the decline in debt service coverage and depletion of cash resources at these cities.
PLANT PERFORMANCE BELOW EXPECTATIONS: Operating performance at PSEC, a dual unit, pulverized coal-fired generation station located in southwest Illinois, has been relatively weak since entering commercial operation and was hampered by several unscheduled outages and re-rates during 2013 and 2014. While the take-or-pay nature of the PSEC contracts obligates the participants to pay regardless of plant performance, the resultant reduction in plant availability along with higher transmission congestion costs increased all-in power costs to well above original estimates which in turn has pressured participant financial metrics.
STRATEGIC OVERVIEW IMPLEMENTED: The owners of PSEC, including AMP, have implemented a strategic overview designed to stabilize and improve operations in 2015 and beyond. The overview, which includes a change in project leadership, appears reasonable and has contributed to stronger plant availability toward the latter part of 2014.
ENTIRE OUTPUT CONTRACTED: AMP'S entire share of PSEC output is purchased pursuant to take-or-pay power sales contracted with 68 municipally-owned electric systems. Participants' obligations consist of their respective shares of the project costs. Debt service is paid entirely by the municipal systems as an operating expense.
RATING SENSITIVITIES
CHANGE IN PARTICIPANTS METRICS: The operating and financial metrics of the project participants, many of whom exhibited meaningful erosion in financial metrics during 2013, will be a key factor in future rating actions.
STANDARD CONTRACT STEP-UP PROVISION: The power sales contract includes standard step-up provisions that require each participant to step up its purchase by 25% of its original allocation of the project output in the event that another participant defaults.
Well what do you think? How will all this affect Painesville?
posted by terminator1 @ 12:12 PM
13 Comments
13 Comments:
It's a collective.
Hope no one defaults.
Question who do you think you are bad mouthing the the progress and hard work that is being done on Main St.? To begin with you need a stable downtown to reenergize the city. We need more not less.
I have never seen you at a PCIC event helping out but you only complain about the money being spent downtown. To me the project is a complete success and do us all a favor and stay home on Monday night!
WEnough, please understand I wasn't criticizing any individuals my problem is the whole focus on our limited resources being constantly being spent on downtown.
You may find it hard to believe that with the current situation in town many have grown tired of the constant downtown revitalize this or that and not only myself but many other's have questioned if that Main St. streetscape makes a lick of sense or will bring anyone businesses of merchants to downtown. Many believe these projects are to the benefit of a few connected people. As I mentioned there is more to Painesville than a park and two blocks of Main St.
Groups like PCIC should be thanked and appreciated for the hard work they do. Problem is in the last five years I see nothing that would make me come downtown besides visiting my bank.
Hope you enjoy what Painesville has gifted you with, I hope its the end.
The money spent on Main Street is pretty moot. They have a building with black plastic hanging in the windows and they have done nothing to bring this individual under compliance with city codes already on the books. The city needs to deal with the owner and get the prime property up to snuff. How is this allowed to happen. Who is this owner that has the city flumoxed. Address the issues with Atwells, power plant etc. The one thing I enjoyed, the Farmers Market, even got messed up.
After 30 years of trying to support city projects I have come to the conclusion I will be long dead before this place turns around. Hope I am wrong but how long must one wait for the trickle down of Main Street? If Main Street improvement is the only incentive for businesses to open I don't think many will be beating a path to downtown Painesville.
And honestly if you think small businesses on Main Street are enough to offset the tax base of a missing hospital and larger business you might need to take an accounting class.
You? Not criticize an individual? HA!
Meanwhile, back on topic...
Rating Action: Moody's assigns A1 rating to AMP Inc. Prairie State's Series 2015 A and B;
Global Credit Research - 16 Dec 2014
Affirms ratings and the outlook is stable
New York, December 16, 2014 --
Moody's Rating
Issue: Prairie State Energy Campus Project Revenue Bonds, Refunding Series 2015A; Rating: A1; Sale Amount: $524,925,000; Expected Sale Date: 12-24-2014; Rating Description: Revenue: Government Enterprise
Issue: Prairie State Energy Campus Project Revenue Bonds, Refunding Series 2015B; Rating: A1; Sale Amount: $138,755,000; Expected Sale Date: 12-24-2014; Rating Description: Revenue: Government Enterprise
Opinion
Moody's Investors Service has assigned the rating of A1 on the American Municipal Power Inc. $524,925,000 Prairie State Energy Campus Project Revenue Bonds Refunding Series 2015 A and $138,755,000 Refunding Series 2015 B. AMP Inc. may issue direct purchase bonds on an unrated basis. At the same time, Moody's affirmed the A1 rating on the portions of the American Municipal Power Inc. (AMP) outstanding Prairie State Energy Campus Project Revenue Bonds, Series 2008 A, Series 2009 A bonds that are not refunded as well as Series 2009 B and C and Series 2010 A. The rating outlook is stable. The bonds are expected to be sold in late December 2014.
Rating Rationale:
The main consideration in the assignment and affirmation of the A1 rating is the strong bond security which includes the unconditional take-or-pay obligation of 68 municipal project participants in the AMP Inc. Prairie State project to pay O&M and debt service on the revenue bonds. The Prairie State Project represents AMP's 23.26% ownership interest in the 1628 MW coal-fired generation facility and adjacent coal mine that has 32 years of Illinois Basin fuel supply. Eight other utilities including five other municipal joint action agencies are the other owners of Prairie State and their debt is separately secured from AMP revenue bonds.
The two-unit coal-fired generation facility went into commercial operation in 2012. The obligation of the AMP participants is an unconditional obligation provided for in state statutes and is payable by participants regardless whether the project operates or not. AMP's Prairie State municipal utility participants were fully compliant with their legal obligations in 2014.
The average weighted credit quality of the participants is in the mid "A" rating range but Moody's weights heavily that the numerous participants are spread across a large geographic area which reduces concentration risk. Also no one participant's obligation represents a major portion of the total AMP Prairie State revenue bond obligation and Prairie State coal fired generation overall represents on average 16% of AMP's power supply mix.
The service area economy of the participants continues to rebound from the recession, yet demand growth is slower than what had been projected. Electric loads are back to 2007 levels with energy efficiency programs having an impact on demand growth.
The rating further considers the important role American Municipal Power Inc. (A1 issuer rating, stable outlook) plays in power supply planning and procurement including the successful implementation of its fuel diversification strategy and for its provision of other energy services to municipal participants.
TBC next post...
cont'd...
Both units of Prairie State went commercial in 2012, at a much lower capacity factor than had been originally projected due to a mechanical issue impacting Unit 2. The delay in commercial start up sparked some customer criticisms since debt service was being paid prior to any energy being received. In 2014, the units operated at a somewhat lower capacity factor than budgeted at nearly 70% in 2014. The impact of less generation versus budget on current retail rates of participants was minimized by the use of available unspent funds being applied to participant billings in 2013 and the use of a rate stabilization fund to ease higher costs in 2014.
The current offering provides for a restructuring of principal with principal repayment now beginning in five years leading to debt service savings of about 4% through a soft put on the Series 2015 B bonds. AMP Inc. will take the cash flow savings in excess of $10 million annually in the first five years from the new debt service schedule to provide additional cushion to ease impact of higher Prairie State costs on ratepayer bills. While all AMP participants have met their contractual obligations to date, the debt restructuring gives more headroom to absorb the weight of the related fixed costs. Overall AMP's wholesale rates that incorporate Prairie State and other owned generation costs and market purchases are now competitive and improve further with the debt service savings. This also helps to mitigate the phase-in of AMP's new hydro-electric generation projects expected to be commercial in 2015.
With respect to operational performance, should Prairie State not meet its objective of operating at 80% capacity factor over the long-run, rating pressure could surface as a lower capacity factor would likely raise participant's costs. This is particularly the case if we believed that a substantially lower than expected capacity factor would be sustained. Moody's believes, however, that Prairie State management has a defined proactive plan to improve plant performance and progress is being made towards that end. A slag issue and a boiler improvement project to fine tune the combustion, air flow, pressures and temperatures are being resolved. Forecasted capacity factors for Prairie State generation were not achieved in 2014 due to longer than expected outages to make repairs and changes to improve performance. AMP management again expects improvement in 2015 to a capacity factor in the 80% range and the trend over the past several months indicates progress towards that objective. Newly appointed Prairie State management and the uncovering of several performance issues could result in a better performance record.
TBC next post...
cont'd...
Moody's believes however that the value of Prairie State as a long term asset remains favorable as a source of long-term stable electrical capacity for the participants. The plant enjoys a very competitive onsite 30-year supply of coal reserves with no transportation costs and level debt service which equates to a stable capacity price for an extended period. This could be a particular advantage as energy and capacity markets change as a result of industry developments such as the shutdown of older coal-generation; pricing of carbon through regulation; and stronger economic trends. See Moody's special comment "Prairie State Coal-Fired Generation Project: An Economic Asset Which Should Support Owner's Willingness to Meet Obligation to Bondholders" published December 2012.
The participants have a diverse power supply mix with Prairie State coal generation representing on average about 16% of their peak load requirement. AMP's coal-fired generation is well below the region's average reliance on coal and Prairie State represents the most advanced technology; already meeting the most stringent environmental standards and being among the newest units constructed. AMP reports that Prairie State is fully compliant with the MACT being considered as an existing plant for the Mercury and Air Toxics rule.
Moreover, we understand that Prairie State's existing technology already surpasses the EPA's new proposed Carbon Rule for existing coal-fired generating units. Without advancements in carbon capture and control technology, it is unlikely that further plant specific restrictions are possible given the state and cost of such technology. In the extreme case and in the absence of carbon pricing, EPA regulation could be implemented that would require reduced output of coal-fired generating units which, in the unlikely event that it was adopted, would present challenges for Prairie State along with many other coal-fired units.
The proposed EPA carbon rule is not expected to be finalized until June 2015. AMP supplies most of its participants with a broad set of power supply sources including owned hydro and gas fired generation and through power market purchases. This power resource diversity is a positive credit consideration. AMP's participants have a competitive advantage with their retail rates being lower than neighboring utilities largely due to the overall competitive wholesale power rates charged by AMP.
That's what I think.
8:21 Someone spending as much or more time on this issue?
As mentioned above this plant is owned by a collective
AMP-OHIO American Municipal Power
IMEA Illinois Muni Electric Agency
IMPA Indiana Muni Power Agency
KMPA Kentucky Muni Power Agency
MJMEUC Missouri Joint Muni Electric Utility Commission
NIMPA Northern Illinois Muni Power Agency
Peabody Energy
Many players and all have to be successful for this to work.
I hope everyday this project works along with the belief we should have never got into this mess.
Yes, there are multiple owners of Prairie State. However, if you read the Moody rating, you would have seen that the debt of the other "players" is separately secured. Should they default, it would not place an additional burden on AMP or its members.
Another point to remember that is stated incorrectly in the Fitch Rating is that AMP member obligation to aborb other AMP members default is capped at 25% of what the member purchased. Painesville's 9.2 mWH could at the most go to 11.5 mWH. On November 25, you italicized, bolded and wrote in all caps that Painesville's 9.2 mWH could triple. Since all caps is generally accepted in internet etiquette as yelling, I can only imagine that you were letting out an internet scream. The claim was blatantly false, and since you suggested that councilman Foder should read the contract, it would appear that you need to do so as well.
4:11 You Moody and I must be reading different contracts.
I don't believe Moody's shed the truth on the whole situation.
Both agencies' see the municipalities that are stuck with high rates. Question; How long can this continue?
Moody never bothered to look into the books of the communities in the AMP-OHIO PSEC deal. AMP-OHIO's books look great . How about Cleveland's, Bowling Green electric reserve funds?
AMP-OHIO brags about rates at $73.66 MWh. Really DOUBLE the going rate for power.
I believe Moody's AMP rating was due to the fact the electric rates are captive not competitive. They can't get out of the deal.
AMP-OHIO used questionable incomprehensible explanation hiding the true cost of power from the plant. what's Levelization, how about the $300,000 Painesville paid in 2012 and got NOTHING?
Moody the same people who did AMP-OHIO put Batavia, Illinois on a negative credit watch. The reason? Moody's notes that Batavia trouble is rooted also in an off-balance sheet a problem faced by every community in the PSEC consortium. If those debts were brought onto the books, well many communities would violate state debt standards. So let me get this straight PSEC is in great financial shape but communities buying from them are going broke?
So I guess my two questions are were we lied to about what we would pay for power? And if a city like Paducah, Batavia, both part of PSEC collapse's on its debt. does affect AMP-OHIO? If not how can that be?.
Paducah, just had it's rating downgraded to BBB all because of PSEC.
Moody also gave ENRON high ratings. So did Fitch but it seems only one has learned their lesson.
Interesting stories even if one of our electric employee's try's to paint a pretty picture some in our community realize what a giant mistake was made with Prairie State. Keep the information coming.
As we all watch the electric fund shrink.
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