ElectriCities Bond Muddle


ElectriCities Bond Muddle

Follow the Money and You’ll see the problematic management  of ElectriCities especially when it comes to the Eastern Power Board.

Why does one Power Agency have a higher credit rating than the other? And do cities such as Rocky Mount pay tens of millions of dollars in extra financing fees when a management solution could have prevented this?


the following is based on information provided by Stand & Poor, Moody, & Fitch

Electricities, manages both power agencies: NCMPA1 (western nc) and NCEMPA (eastern NC).
yet the western power agency has a much better bond rating than the eastern agency.

Electricities own press release:
http://www.electricities.com/press/press_releases/2008-05-06_ncempa_credit_rating_affirmed.html

http://www.electricities.com/press/press_releases/2008-05-06_ncmpa1_rating_upgraded.html

eastern power agency  ElectriCities own press release states:

Raleigh, NC, May 6, 2008 –Three credit rating agencies affirmed the credit rating of North Carolina Eastern Municipal Power Agency (NCEMPA) after a comprehensive update provided by the Power Agency. Moody’s Investor Services (Baa1), FitchRatings (BBB+) and Standard and Poors (BBB) all reaffirmed their ratings for the Agency. Factors influential in the affirmation include NCEMPA’s stable financial position and its Participants well-diversified and growing customer base.

western agency
Raleigh, NC, May 6, 2008
–Two credit rating agencies upgraded the credit rating of North Carolina Municipal Power Agency Number 1 (NCMPA1) after a comprehensive update provided by the Power Agency, while a third rating agency affirmed a recent upgrade. Moody’s Investor Services upgraded the rating from A3(stable) to A2(stable). FitchRatings upgraded the rating from A-(stable) to A(stable). Standard and Poors reaffirmed their rating of A- that was upgraded from BBB+ in December of 2007. Factors influential in the upgrades include NCMPA1’s strong financial position, its sound market position with its nuclear ownership and its improved supplemental power supply arrangements.

Along with these poor bond ratings, electricities pays back debt with “a high average wholesale rate and high member retail rates alone with the ability to quickly pass rate increases.

From: http://www.allbusiness.com/banking-finance/financial-markets-investing/5171970-1.html

The rating encompasses NCEMPA’s solid, take-or-pay contracts with its members and stable financial performance offset by a high average wholesale rate (approximately 7.4 cents per kwh for 2004 including transmission), high member retail rates, and relatively low liquidity. NCEMPA exhausted its rate stabilization reserves in early 2002, as anticipated and remaining liquidity amounts to roughly 123 days operating cash. While this level of liquidity is low for the rating category, NCEMPA utilizes an energy adjustment ‘rider’ to quickly pass-through rising fuel costs and help maintain a stable financial position. Leverage is better than average for the rating category, with net debt to funds available for debt service at 8.3 times (x) for fiscal year end 2004. With no new debt issuances projected through at least 2008, the debt burden should continue to decline.

On a retail basis, the members’ rate disadvantage is not as large, particularly for industrial users that have the benefit of economic development rates and load management rate incentives.

http://www.reuters.com/article/pressRelease/idUS223350+12-Sep-2008+BW20080912

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About George Fisher

George is a freelance writer, an author and a Democratic political consultant. He has worked as Deputy Communications Director for a Senatorial campaign and Campaign Manager for several NC House races and one congressional race. He previously worked as a news producer for a local television station.
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