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Missouri River Energy ServicesMissouri River Energy Services
September 09, 2010
Latest Headlines

12/11/2009
 Fitch reaffirms WMMPA/MRES bond rating
Sioux Falls, S.D. -- Fitch Ratings, a New York-based financial rating agency, has affirmed its 'AA-' rating on the outstanding power supply revenue bonds of Western Minnesota Municipal Power Agency (WMMPA)/Missouri River Energy Services (MRES). Fitch also reaffirmed its stable outlook for WMMPA/MRES.

Bonds included in the rating are $203.7 million power supply revenue bonds, series 1996A, 2003A&B and 2006A. Fitch said its rating is supported by a range of factors including:

• Low cost power resources;

• Strong, long-term power sales contracts that extend to 2046;

• Financial strength provided by 57 member systems across four states that are obligated to purchase wholesale power from MRES;

• Solid management and a supportive board of directors;

• Recent rate increase designed to restore financial performance in fiscal 2009;

• Reasonable plan and adopted rate increases to replenish the discretionary funds by 2012;

• Recent cancellation of the Big Stone II coal-fired unit, which gives the company the opportunity to explore alternative (less carbon-emitting) generation options.

Fitch also reported that it incorporated credit concerns into its rating. A particular concern was the use over the past few years of reserve funds, mainly to cover the impact of external factors including a 2006 ice storm that destroyed hundreds of miles of key transmission facilities and a significant increase in rail rates that occurred for its principal generating facility, the Laramie River Station (LRS) from 2004 to 2009. Fitch noted that the use of reserves allowed MRES to remain in compliance with its rate covenant and that the organization implemented an 18.5-percent rate increase in January 2009, which was necessary to restore its financial performance.

MRES has adopted a detailed plan to restore its debt service coverage and its reserve funds. The plan assumes that the U.S. Surface Transportation Board (STB) ruling against BNSF Railway Co., which has resulted in a $19.1 reparation payment to MRES is not overturned. BNSF is appealing the STB ruling to the United States Court of Appeals and, during that appeal process, the reparations payment will remain in a separate fund.

MRES, in early November, announced the cancellation of the proposed 580-megawatt Big Stone II coal-fired power plant due to an inability of the four regional utilities participating in the project to replace Otter Tail Power Co., which had withdrawn from the project two months earlier. The current generating resource mix of MRES is heavily dependent upon carbon emitting resources and, “given the likelihood of new federal carbon legislation, Fitch believes that the Big Stone II cancellation should provide MRES the opportunity to explore alternative generation options,” a Fitch news release said.

“We are pleased that Fitch continues to show confidence in MRES, WMMPA, and the membership by affirming the AA- rating,” said MRES Director of Finance and CFO Merlin Sawyer. “While we have not met our financial targets the last couple of years, we are confident that we will meet or exceed those targets through the next few years. We believe that the affirmation of the AA- rating reflects the fiscally prudent policies of MRES and WMMPA, that the MRES membership has not been significantly affected by the economic slowdown that has severely stressed many other parts of the country, and that the MRES and WMMPA Boards do not shy away from or delay making difficult decisions.”





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