By VERNON ROBISON
Moapa Valley Progress
Moody’s Investors Service has affirmed its Baa1 rating for Overton Power District’s $14.9 million of outstanding special obligation net revenue bonds. In the process the international bond rating company has also removed a negative outlook that it held on the OPD bond issue.
“The rating affirmation and removal of the negative outlook reflects a trend of improved debt service coverage and liquidity,” stated a Moody’s report issued earlier this month.
The action was the second upgrade OPD has received on its bonds this year. Fitch Ratings company also issued an upgrade on OPD bonds back in April of this year.
OPD General Manager Mendis Cooper attributed the more positive ratings to the fiscal displine that the district has employed in recent years. The OPD Board raised rates moderately in 2012 when key financial measures declined below the required benchmarks set by the bond issue. This increase, along with a series of cost-cutting measures has brought the district back in line and paved the way for the credit rating upgrades, Cooper said.
“It has been a lot of work and careful management, but we are seeing the benefits,” Cooper said.
Last month, the board actually voted to refinance nearly all of its bond debt at a signicantly lower interest rate. That is expected to save OPD ratepayers nearly $7 million in debt service costs over the next 23 years.
Despite the positive outlook, the Moody statement also expressed concerns that financial operations at the district would “remain pressured in the near-term due to increasing transmission fees with limited rate increase plans.”
“The Moody’s analysts expressed two main concerns as they looked into the future of the district,” Cooper said.
The first concern was that the main energy contract for OPD will be expiring in 2017. This leaves some uncertainty in the future cost of power. But Cooper explained that district staff is looking to lock in a new contract for energy by the end of this year that will clear up some of that uncertainty.
Secondly, the analysts were concerned about the future of increased transmission costs for OPD. The district is facing a doubling in costs to transmit its power over lines belonging to NV Energy. This could have a huge impact on finances for the district, Cooper said.
“We have hired an attorney to look into what our options are in that situation,” Cooper said. “It is still an ongoing conversation at this point and there is, thus far, nothing new to report about it.”
Cooper said that his staff had reported to Moody analysts that there were no rate increases expected for the rest of this year. The board would then wait and see how these issues play out to make a decision on rates going forward, he said.
“We hope to be able to absorb the additional costs without an increase,” Cooper said. “But we have to see what kind of headway we make in those two areas. I think that any rate increases over the next two years will be largely dictated by that transmission cost issue.”
