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Fitch Rates Wisconsin Public Power Inc.'s Series 2008A Bonds 'A+'

Posted on: Friday, 11 April 2008, 18:00 CDT

Fitch Ratings assigns a rating of 'A+' to Wisconsin Public Power Inc. (WPPI) $234.685 million power supply system revenue bonds, series 2008A. Fitch also affirms the 'A+' on WPPI's outstanding power supply revenue bonds. Proceeds of the series 2008A bonds will be used to refund outstanding auction-rate securities (series 2003B, 2003C and 2005B); pay a swap termination fee associated with the auction-rate bonds, depending on market conditions; pay a portion of the costs of the construction and improvements of the Boswell 4 facility; fund capitalized interest associated with the Boswell 4 improvements and a prior issue; and to fund a debt service reserve. The bonds are expected to sell during the week of April 21, 2008. The Rating Outlook is Stable.

The 'A+' rating reflects WPPI's experienced management team which has the support of its growing member and non-member base. While there is some concentration among the largest industrial customers of the members (with the four largest accounting for 16% of energy requirements), helping to offset this is that many of the large customers have entered into long-term purchase power contracts with WPPI and its members, and more important, WPPI's competitive advantage - rates that are lower than those charged by the locally serving investor-owned utilities. Financial operations have been solid and projections show targeted debt service coverage of 1.25 times (x) through 2017, in line with other 'A+' rated systems. Another positive attribute is WPPI's power resource mix, which is diverse with sufficient capacity into 2017. The terms of the various power purchase contracts provide WPPI further flexibility.

Looking forward, Fitch will continue to monitor the construction of the Elm Road Project which consists of two 615 MW (megawatt) coal-fired units. WPPI is an 8.33% participant in the project and, to date, the project is on schedule and approximately 50% complete. There is some ongoing litigation with respect to the water permit. A negative outcome of this litigation could require the project to construct cooling towers. However, from discussion with management, Fitch does not anticipate that this would have a significant impact on WPPI's overall share of project costs.

WPPI sells wholesale power to 41 all-requirements members in the state of Wisconsin, in addition to eight non-members located in the Upper Peninsula of Michigan and north-eastern Iowa. Combined, these entities serve approximately 191,400 customers and a population of 333,000. In 2007, energy requirements supplied to members and non-members totaled 5.29 million MWh (megawatt hours), reflecting a 5.2% increase over the prior year. Peak demand in 2007 was 973 MW. WPPI serves these customers through diverse resources - self generation, purchase power, and member/customer generation.

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.

Source: Business Wire

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