TEXT-Fitch raises Mo. Joint Muni Electric Utility revs to 'A'

Wed Nov 14, 2012 11:58am EST

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Nov 14 - Fitch atings has upgraded the following Missouri Joint Municipal
Electric Utility Commission (MJMEUC) Power Project Revenue Bonds (Prairie State
Project) to 'A' from 'A-', with par amounts as of Dec. 31, 2011:

--$554,453,287 Series 2007A and Series 2007B;
--$206,004,151 Series 2009A and Series 2009B;
--$77,760,292 Series 2010A and Series 2010B.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by net revenues from MJMEUC's interest in the Prairie
State Energy Campus (PSEC) project.

Net revenues are principally derived from unconditional, take-or-pay power
purchase agreements with MJMEUC's seven unit power purchasers (UPPs) and by
funds collected from its Missouri Public Energy Pool #1 (MoPEP 1; power supply
system bonds rated 'A' by Fitch).

KEY RATING DRIVERS

SOUND PURCHASER FUNDAMENTALS: The upgrade principally reflects Fitch's favorable
view of the largest UPPs and MoPEP 1, whose credit characteristics support the
higher rating.

ROBUST CONTRACT STEP-UPS: Participant default risk is mitigated by a requirement
that each of the seven UPPs step-up their original entitlement shares by 200%,
as well as the effectively unlimited step-up of the MoPEP 1 participants.
Consequently, bondholders do not have direct exposure to any one participant.

FULL COMMERCIAL OPERATION: Both PSEC units have achieved commercial operation,
which alleviates project construction risk.

COMPETITIVE PROJECT ECONOMICS: Despite increased costs associated with
construction delays, project economics and characteristics suggest that PSEC
will be a competitive power resource over the long-term. MJMEUC's forecasted for
the cost of power is $56 - $59/MWh, and the project includes a mine-mouth coal
supply and various transmission ties.

ADDITIONAL RESERVE REQUIREMENTS: The PSEC indenture requires MJMEUC to begin
funding two reserves - a $2 million reserve and contingency fund and a $5
million operating reserve - commensurate with the commercial operation of the
project, which enhances project liquidity. The latter reserve was funded with
2009 bond proceeds.

CREDIT PROFILE

MJMEUC is a joint action agency formed in 1979 to provide its member utilities
with an adequate, reliable, and economical power supply. The growing MJMEUC
membership principally consists of 69 retail electric systems, ranging in size
from approximately 200 retail meters to 110,000, dispersed across the State of
Missouri.

In addition to the PSEC project and MoPEP 1, MJMEUC has interests in the Plum
Point and Iatan 2 projects. Each project is separately secured.

PRAIRIE STATE ENERGY CAMPUS

PSEC is a mine-mouth, pulverized coal-fired generating station located in
southwestern Illinois. The generating station consists of two supercritical
units with a net rated capacity of 800MW each, and the plant design incorporates
state-of-the-art emissions control technology for reduced carbon emissions
versus a legacy U.S. coal plant. Coal reserves at the adjacent mine are expected
to meet fuel needs for 30 years.

The PSEC project experienced several months of delays and cost overruns.
However, both units are now live; unit 2 was placed into commercial operation
Nov. 2, 2012. This alleviates project construction risk and triggers a MJMEUC
indenture requirement to fund $7 million of additional reserves (a large portion
of which has already been funded) that enhance project liquidity. MJMEUC's
forecast for cost of power remains competitive at $56 - $59/MWh.

MJMEUC INTEREST AND STEP-UPS

MJMEUC has a 12.33% (195MW) interest in the PSEC project for the Missouri cities
of Columbia, Kirkwood, Hannibal, Fulton, Marceline, Centralia, and Kahoka
(113MW) and MoPEP 1 (82MW). The unit power purchaser agreements include generous
step-up provisions equal to 200% of the original allocations, and the MoPEP 1
pool power purchase agreements essentially require an unlimited step-up of
participants.

UPPs are not required to support MoPEP 1 participant obligations and vice versa.
However, the step-ups imbedded and inherent in the respective contract types are
sufficient to cover the default of any one participant, which ultimately
benefits bondholders.

UPPs

The largest UPPs own and operate retail electric systems that generally exhibit
good financial metrics and service territories, as well as average customer
rates. The three largest UPPs - Columbia, Kirkwood, and Hannibal - have strong
balance sheets and good cash flow metrics that sufficiently support the MJMEUC
PSEC project rating. The utilities' aggregate fiscal 2011 ratio of equity to
capitalization equaled 50%, and cash on hand was a healthy 137 days. Debt
service coverage and coverage of full obligations were 3.3x and 1.2x,
respectively.

MoPEP 1

MoPEP 1 has grown from 19 participants at its inception to 34 today.
Participants are generally small- and mid-sized communities located throughout
the state. Together, the participants serve approximately 95,800 retail
customers and an estimated population of 185,400. Participant energy sales
include a healthy balance of customer segments.

MoPEP 1's financial performance has been stable, generally reflecting the
purchase and sale of required power supply. For 2011, the fund reported
operating income of $4.5 million on revenue of $190.7 million, and fund equity
increased $3.5 million to $17.5 million. MJMEUC anticipates that the expiration
of certain purchased power contracts and an increasing proportion of owned
generation will result in more stable and competitive, albeit higher, wholesale
rates for pool participants, ranging from $60-$70/MWh through 2016.

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 Peer Study -- June 2012' (June 15, 2012);
--'Revenue-Supported Rating Criteria' (June 12, 2012);
--'Fitch Rates Missouri Joint Muni Electric Utility Commission's (MO) $32.88MM
Power Supply Revs 'A''(Feb. 6, 2012);
--'U.S. Public Power Rating Criteria' (Jan. 11, 2012);
--'Missouri Joint Municipal Electric Utility Commission (Power Supply System
Revenue Bonds)' (Nov. 14, 2011);
--'Fitch Rates Missouri Joint Muni Electric Util Comm's $80MM Power Project Revs
'A-'; Outlook Stable' (Nov. 15, 2010).

Applicable Criteria and Related Research:
U.S. Public Power Peer Study -- June 2012
Revenue-Supported Rating Criteria
U.S. Public Power Rating Criteria
Missouri Joint Municipal Electric Utility Commission (MJMEUC) -- Power Supply
System Revenue Bonds
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