NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA-' rating to the $150 million Campbell County,
Wyoming Solid Waste Facilities 2009A revenue bonds (Basin Electric Power
Cooperative - Dry Fork Station Facilities). In addition, Fitch affirms Basin's
senior secured debt rating at 'AA-' and its tax-exempt and taxable commercial
paper programs at 'F1+. The Rating Outlook is Stable.
The $150 million proceeds from the 2009A bonds will be used to construct
environmental facilities at the Dry-Fork Station, a 385 megawatt (MW),
coal-fired electric generating unit.
Basin's solid credit ratings reflect the long-term all-requirements contracts
with a large number of electric cooperative systems across a wide service
territory, low-cost and efficiently operating base-load power resources (mostly
coal), low electric rates and well-developed management and board policies.
Fitch also notes that Basin's financial profile (debt service coverage, equity,
and liquidity) on a consolidated basis is above the median for the rating
category. Basin's board has demonstrated the willingness to raise rates as
necessary to maintain financial metrics supportive of the rating category.
Credit concerns include Basin's increasing leverage as it implements a $4.1
billion capital plan (2009-2019) to build new base-load generation. The revised
capital plan reflects a $1 billion reduction in planned expenditures due to
slower load growth. However, Basin's debt to funds available for debt service
ratio of 11 times (excluding subsidiaries) indicates a high level of leverage.
Fitch also notes that with a decline in gas prices, dividends from Basin's
subsidiary, the Dakota Gasification Company (DGC) are expected to decline in the
near future compared to previous projections. Prudently, Basin eliminated its
policy to automatically provide DGC dividends (patronage capital) to its members
in favor of retaining potential earnings at the utility. Fitch's concerns
regarding the high leverage and volatility in DGC earnings are mitigated by the
utility's low-cost federal financing from the Rural Utilities Service and the
modest impact to rates should Basin replace lost DGC dividends with debt.
Fitch will monitor the following key credit drivers that could affect the
rating:
--Maintenance of financial metrics in line with the rating category;
--Maintenance of a balance of debt and equity to support the capital plan, as
the utility is already highly levered;
--Prudent use of Basin's subsidiary, DGC, in supporting Basin's capital plan;
--Timely and economic construction of new generation resources;
--Impact of compliance with future regulations to reduce greenhouse gas
emissions.
Basin is one of the largest electric generation and transmission (G&T)
cooperatives in the nation, owning more than 3,000 MWs of capacity. Its members
provide wholesale supplemental electric service for 125 rural and small
municipal electric systems in nine states: (North Dakota, South Dakota, Montana,
Wyoming, New Mexico, Colorado, Nebraska, Minnesota and Iowa). Through its
members, Basin serves 2.6 million customers. Basin has eight subsidiaries,
including DGC (produces synthetic natural gas and other byproducts) and Dakota
Coal Company (supplies coal to DCG and Basin's utility system). For additional
information, please see Fitch's report on Basin Electric Power Cooperative,
dated Dec. 2, 2008 and available 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.
Fitch Ratings, New York
Yvette Dennis, +1-212-908-0668
Christopher Jumper, +1-212-908-0594
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com
Copyright Business Wire 2009
