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Fitch Rates American Municipal Power-Ohio 'A'
NEW YORK-(Business Wire)-October 3, 2008 - Fitch Ratings assigns an issuer rating of 'A' to American Municipal Power-Ohio (AMP-Ohio). Fitch also affirms the outstanding ratings on the following AMP-Ohio power supply projects:
— Joint Venture 5 project bonds at 'A';
— Joint Venture 2 project bonds at 'A-';
— Prairie State Energy Campus Project bonds at 'A';
— Prairie State Project BANs series 2008 at 'F1'.
The Rating Outlook is Stable.
AMP-Ohio is a non-profit wholesale power and services provider for a mix of 123 all-requirement and partial- requirement member municipal electric systems - 81 in Ohio, 27 in Pennsylvania, seven in Michigan, five in Virginia, two in West Virginia, and one in Kentucky - serving over 540,000 customers. AMP-Ohio also acts as project manager for groups of member electric systems participating in separately secured joint ventures that share ownership of power generation and transmission assets.
The issuer rating for AMP-Ohio reflects the diversity and financial stability of its members, their commitment to AMP-Ohio through a combination of long-term take-or-pay, all-requirement, and partial-requirement power purchase contracts. Added support for the rating comes from AMP-Ohio's solid history of managing the diverse power needs of its membership and its conservative management practices.
In accordance with AMP-Ohio's practice to provide its members maximum with financial flexibility, the system's financial metrics are managed to the individual project covenants. Favorably, AMP-Ohio has liquidity at the organization level to help support its working capital and interim capital improvement needs. This includes a $450 million line of credit, which is used to support its $350 million commercial paper program and its working capital. Given the project nature and security provisions for AMP-Ohio's separate projects (listed above) those ratings take into account debt-service coverage of 1.1 times, and there is nominal project liquidity and each project's varying degree of member mix.
While Fitch expects members' financial performance to remain stable, and their retail rates competitive, the rating also takes into consideration the overall weakness of the Ohio economy and AMP-Ohio's large $4.9 billion capital plan, which includes the simultaneous development of three generation projects.
Key drivers that could affect the issuer and projects' ratings include:
— Construction risks associated with the completion of large coal-fired generators;
— The participants' ability to support AMP-Ohio's debt at the current rating level given manufacturing and housing weaknesses in Ohio's economy; and
— AMP-Ohio's maintenance of lines of credit sufficient to support the bond anticipation notes (BANs) and other financial obligations.
More information is available in Fitch's March 18 and Jan. 30 reports on AMP-Ohio regarding the credit quality of AMP-Ohio PSEC (formerly Prairie State Project) and AMP-Ohio's overall strategy, on the Fitch 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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