Grant County PUD bond rating upgraded

David A. Cole

Herald staff writer

Utility able to borrow money with lower interest rate

EPHRATA — Grant County Public Utility District announced an upgraded bond rating from a major rating agency earlier this week, demonstrating to ratepayers further evidence of the utility's strong financial condition.

Fitch Ratings upgraded the Grant County PUD's electric distribution system credit rating based on what they said was an "improved financial condition, strengthened power supply position, and fiscally sound, proactive new management team."

In preparation for a December 2005 Priest Rapids Hydroelectric Development revenue and refunding bond issue, PUD officials earlier this month met in San Francisco with bond rating agency representatives to evaluate the utility's current standing in the bond market. The PUD officials also wanted to look at the bond market conditions and timing of the upcoming bond issue.

The first bond rating agency to provide feedback, since the meeting, was Fitch and they moved the electric system credit rating from "AA-" to "AA."

A borrower's credit rating effects the interest rate paid when the bonds are issued.

PUD commission president Bill Bjork said that Fitch is highly thought of in the industry right now and to receive a "AA" rating for about 62 percent of the underlying credit of the bond issue will make the bonds easier to sell.

Neither Moody's nor Standard & Poors have issued new bond ratings for the PUD.

Fitch, however, said the new power sales contracts that went into effect on Nov. 1 were a positive development, because the PUD was able to improve its power supply position by keeping more of the output from Priest Rapids Dam. Fitch also noted as positive the PUD's "very low retail rates — averaging just 2.96 cents per kilowatt hour for 2004," according to a Nov. 11 Fitch Ratings press release.

"Financial protection measures, including liquidity and debt service coverage, have improved over the past 10 months to approximately 250 days operating cash and 2.1 times debt service coverage," the Fitch release stated.

"In the last 10 months, the commission and senior management staff have changed to a philosophy of financial accountability," Bjork said.

He said the decision to increase the amount of money maintained in the reserve and contingency fund to $70 million, despite recent criticism, has been a benefit to the PUD's financial condition and will reduce the possibility of future rate increases.

The move from $17 million in early 2005 to a goal of $70 million in the reserve and contingency fund will provide security in back to back critical water years, and offer increased rate stabilization, he said.

Fitch viewed favorably the PUD's success in navigating past many of the major hurdles in receiving a new license from the Federal Energy Regulatory Commission to operate the Priest Rapids and Wanapum Dams. PUD officials are confident FERC will make a decision on the new Priest Rapids Hydroelectric Project operating license as early as July 2006.

PUD officials plan to have the bond issue pricing completed later this month, with Citigroup as lead underwriter of the deal.

The planned Dec. 1 sale of PUD bonds is expected to pay for about $35 million worth of generator restorations, some powerhouse improvements and fish and wildlife programs. Approximately $65 million will be sold to pay for the refunding or refinancing of older bonds.

The PUD anticipates having new large scale bond issues every two years for the next five or six years to pay for capital works projects at the two dams, Bjork said.