Moody’s Investors Service made three positive utility credit rating assessments for $760 million in gas purchasing and electric operations revenue bonds. New York, California and Georgia public-sector utilities received A-level ratings at a time when nearly everything in the financial world seems to be heading downward.
For the two natural gas purchasing units, a recent upgrade of Merrill Lynch Co.’s ratings (“Aa3” from “A2”) triggered the subsequent increase on bonds for multi-billion-dollar gas prepayment deals.
California’s Roseville Natural Gas Financing Authority had $195 million in prepayment bonds (Series 2007A) raised to “Aa3” from “A2.” The bonds finance major gas supply deals for Roseville’s city-run electric utility, for which Merrill Lynch, JP MorganChase Bank NA and Wachovia Bank NA all provided backup roles, making their ratings integral to the bonds’ ratings, Moody’s said.
In Georgia, Main Street Natural Gas Inc.’s $315 million in gas project revenue bonds for the Municipal Gas Authority of Georgia also got a bump up to “Aa3” because of Merrill’s upgrade.
The third credit rating involved Long Island Power Authority’s (LIPA) $250 million in electric system general revenue bonds (Series 2009A), which were assigned an “A3” rating with a “stable” outlook. Moody’s said the ratings reflected the strength of a New York state law (LIPA statute), which gives the public-sector utility “unregulated recovery of all of its costs,” including the $4 billion estimated cost of decommissioning the utility’s ill-fated nuclear plant.
Under the New York law, LIPA’s net electric system revenues provide bond security. “LIPA has the best bond security covenants compared to other U.S. public-power utilities and has a strong statutory act that clearly provides cost recovery,” Moody’s said.
Under the state law, LIPA was given broad powers to fully recover all of its costs as an extension of state government. Thus, LIPA can set rates independent of the New York Public Service Commission, Moody’s said.
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