Two public-sector utilities in California and Tennessee won’t see any change in the credit ratings of their respective natural gas-buying units from the ratings upgrade of Wachovia Bank NA, according to an assessment released Monday by Standard & Poor’s Ratings Services (S&P). Both the ratings and the credit outlook remain unchanged on the $449 million in gas-buying bonds of the two utilities.

Roseville (CA) Natural Gas Financing Authority, the gas unit for the City of Roseville’s electric utility, has $209.4 million of bonds (series 2007A) that remain “A” rated with an outlook designated as “Watch/Developing,” the rating agency said.

The Roseville authority, a state-chartered joint powers financing unit, funded the prepayment on a 20-year, 46 Bcf gas deal with Merrill Lynch Commodities Inc. as a means of helping supply the City of Roseville’s electric utility generation. The gas authority has a supply contract with the city for all of the gas supplied by Merrill under the prepaid contract, with supplies priced at the first-of-month index for Pacific Gas and Electric Co.’s citygate delivery point, minus a specified discount.

In September last year both S&P and Moody’s Investors Service downgraded the Roseville gas-buying bonds.

Similarly, Monday S&P made the same call on the Clarksville, TN, Natural Gas Acquisition Corp.’s (NGAC) $240.1 million bonds (series 2006), keeping them at a “BBB-” rating with a “Watch/Developing” outlook.

“The ‘CreditWatch with developing implications’ on the NGAC transaction indicates that ratings depend on the [acquisition company’s] ability to add structural support to the transaction within a reasonable period of time,” S&P said. “We could raise the rating on the transaction if NGAC structurally enhances the transaction such that bondholders are sufficiently protected if a municipal participant defaults.”

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