2008-07-16 23:47:10 -
- Fitch Ratings assigns an underlying rating of 'AA-' to the City of Austin, Texas' $175,000,000 electric utility system revenue refunding bonds (Austin Energy), series 2008A. Proceeds from the 2008A fixed-rate bonds will refund approximately $174,000,000 of tax-exempt commercial paper. The bonds, with a final maturity in 2024, are scheduled to price on July 24, 2008.
In addition, Fitch
affirms the outstanding Austin Energy (AE) separate lien electric utility system revenue bonds; the outstanding Austin Water and Wastewater (AWU) separate lien water system revenue bonds, and the outstanding Austin Combined Utility System (ACU) prior lien senior and subordinate bonds, at 'AA-'. The Rating Outlook on all bonds is Stable.
Under Austin's master ordinance adopted in 2000, AE and AWU may issue separately secured bonds. Therefore, the 2008A electric utility system revenue refunding bonds are an obligation of the electric utility system, only payable from net revenues of the electric utility system. These electric utility-only obligations are on parity with subordinate lien combined utility obligations and junior to the senior combined utility obligations. However, the now-closed prior lien ordinance (under which AE and AWU issued combined utility system bonds prior to adoption of the master ordinance) remains in effect as long as combined utility system bonds are outstanding (final maturity of 2027). Therefore, the 'AA-' rating of the 2008A bonds reflects the credit profile and the operating performance of both AE and AWU and the senior claim of prior-lien combined utility system obligations.
Supporting the 'AA-' rating are the following:
--Strong operating performance and solid financial position of ACU, AE and AWU;
--A coal- and nuclear-based power supply provides relative value to AE in Texas;
--Rates for AE are very competitive for the region;
--AWU has a long-term water supply agreement through 2050;
--ACU benefits from strong economic and demographic characteristics of the service territory with a well-diversified customer base.
Key rating drivers include:
--The current rating level relies on management's execution of balanced funding for the capital plan for each system, and the implementation of needed rate increases that achieve financial metrics and operating margins in line with other 'AA-' rated systems.
--The continued ability of management and the city council to work together to implement necessary policies, including required rate increases, is an essential component of the 'AA-' rating.
For a review of ACU's (AE and AWU) credit profile, please see the Fitch report, 'Austin, Texas Combined Utility System' dated April 29, 2008, available on the Fitch Ratings web site at www.fitchratings.com.
The ACU System consists of AE (78% of revenues) and AWU (22% of revenues). Both AE and AWU operate as enterprise funds of the city of Austin, Texas. AE provides electric services to more than 388,000 customers (residential: 88.8%, commercial: 10.76%, and governmental authorities: 0.39%). AWU provides treated water and wastewater services to approximately 197,000 and 184,000 customers, respectively. ACU serves both residential and commercial customers within the city of Austin and portions of Travis and Williamson Counties.
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 M. Dennis, 212-908-0668
Karl Pfeil, III, 212-908-0516
Christopher Kimble, 212-908-0226 (Media Relations)
