Gregory J. Nickels (former Mayor)
SUBJECT: Moody's, S&P upgrade City Light's financial outlook
12/13/2004 3:30:00 PM
Michael vanDyck, 684-8347
Scott Thomsen (206) 386-4233
Moody’s, S&P upgrade City Light’s financial outlook
Rating agencies cite utility’s financial progress, resiliency
SEATTLE- Two credit-rating agencies have boosted the financial outlook for Seattle City Light and affirmed their ratings for the utility, Seattle Mayor Greg Nickels announced today.
Standard & Poor’s affirmed its ‘A’ rating and bumped up its outlook for City Light two notches, from negative to positive. Moody’s Investor Services affirmed City Light’s ‘Aa3’ credit rating and upgraded the utility’s outlook from negative to stable. Both ratings apply to existing debt, as well as $58.6 million of new financing for capital improvements and up to $230 million of debt refinancing.
“This is excellent news,” Seattle Mayor Greg Nickels said. “Our goal has been to stabilize City Light in the wake of the energy crisis, for the long-term benefit of its ratepayers. These ratings affirm that we’re on the right financial course.”
“The City Council has been encouraged by City Light’s improving financial situation,” said Jean Godden, chair of the council’s Energy and Environmental Policy Committee. “This is another indication of that improvement.”
“We’re pleased that both Moody’s and S&P have acknowledged our progress,” said City Light Superintendent Jorge Carrasco. “One of the priorities I set when I joined the utility this year was to create financial stability and flexibility. We’re getting there.”
Since the 2000-2001 energy crisis, City Light has paid off all short-term debt associated with higher power costs, acquired enough resources to be surplus in almost every month, even in dry years, adopted new, more conservative financial policies, and built up its operating cash reserves to cover short-term variation in its cash flow. Rates have remained stable. The two rating agencies cited similar reasons for their actions.
S&P said its rating “reflects Seattle City Light’s fundamental credit strengths, improved financial position, and full recovery of deferred power costs incurred in 2001.” The agency noted that in 2004, City Light “met its objective of retiring its short-term debt (and) rebuilding cash reserves to adequate levels …”
Moody’s said that the change from a negative to a stable credit outlook “reflects that Seattle City Light has emerged from a period of financial stress, demonstrating in the process its financial resiliency.” Moody’s credited City Light for adopting and adhering to a “decisive” financial plan for recovery from the energy crisis of 2000-2001. In 2004, “all short-term debt had been repaid and operating reserves were built back up to better protect against a certain level of risk exposure.”
“The credit outlook has been changed to stable from negative given the progress the utility has achieved in restoring its financial health,” Moody’s said.
Standard & Poor’s said its rating reflects the following strengths:
- The City’s ability to establish rates for its electric utility;
- Strong support by the City to stabilize and rebuild City Light’s financial position;
- Stronger financial policies and planning assumptions that reduce the utility’s market exposure and risk;
- Strong debt service coverage;
- Renewed load growth in 2004.
According to Moody’s, City Light’s credit strengths include:
- Ownership of low-cost hydroelectric generation;
- Willingness to raise retail rates to insure financial position;
- Retail rates that remain below national averages and competitive with regional averages;
- Access to the City of Seattle’s strong cash pool;
- Recognition of the need for strong financial policies.
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