Fitch Ratings said Oct. 16 that it has assigned an ‘A’ rating to certain Missouri Joint Municipal Electric Utility Commission (MJMEUC) power project revenue bonds related to the Iatan 2 coal-fired project built several years ago.
The bonds are expected to price via negotiation during the week of Oct. 19. Proceeds will refund a portion of MJMEUC’s outstanding series 2006A and 2009A bonds for savings. In addition, Fitch has affirmed the ‘A’ rating on other MJMEUC power project revenue bonds for Iatan 2. The Rating Outlook is Stable.
The bonds are secured by Iatan 2 project net revenues, which are principally derived from: two unit power purchasers (UPPs), Independence Power & Light (IP&L) and Columbia Water and Light (CW&L), pursuant to life-of-unit, take-or-pay unit power purchase agreements (UPPAs); and the 35 members of the Missouri Public Energy Pool #1 (MoPEP 1) under all-requirements, take-and-pay pool power purchase agreements (PPPAs).
MJMEUC is a growing joint action agency comprised of 67 municipal retail electric systems located across the state of Missouri. Advisory, non-voting membership has been extended to four additional Arkansas-based retail electric systems.
The two UPPs’ and MoPEP 1 members’ credit characteristics underpin the ‘A’ project rating, pursuant to separate power purchase agreements. The participants, who purchase MJMEUC’s entire 100 MW interest in the project, exhibit generally solid financial metrics and customer diversity, Fitch wrote. In addition, each system’s self-regulation of rates supports the full and timely recapture of costs.
Strong unit performance, including some of the lowest heat rates in the country for a coal-fired generating asset, supports long-term project economics. In addition, Fitch pointed out, the unit is equipped with the latest environmental control technology that should contribute to relative rate stability.
MJMEUC has an 11.76% (100 MW) undivided ownership interest in the Iatan 2 project, a supercritical coal-fired facility. In addition to the Iatan 2 project, MJMEUC has interests in the Plum Point (147 MW) and Prairie State Energy Campus (195 MW) coal-fired projects, as well as ownership of the Dogwood combined cycle plant and Fredericktown peaking plant through MoPEP 1. Each project, as well as the MoPEP 1 obligations is separately secured.
Iatan 2’s operating performance has been solid relative to industry standards, as management continues to work through startup issues. The unit ran from March 17, 2013, to its mid-April 2014 scheduled outage without disruption, after planned and unplanned outages in early 2013, Fitch reported. Outages have caused some fluctuations in plant capacity factors with the ratio dropping to 59.1% in 2014 compared to 78.2% in 2013 and 88.5% in 2012. However, the capacity factor was around 71.5% through August 2015 and expected to remain at solid levels with the next major outage (28 days) not planned until Fall 2016.
The unit heat rate is competitive averaging 9,159Btu/kWh from 2012 through 2014. In addition, the unit was designed for 850 MW of output, but actual output has been closer to 870 MW.
The project cost of power has been higher than early estimates but remains competitive with other recently completed, coal-fired units. Moreover, MJMEUC believes the unit’s emission-control technology should benefit rate stability over the long term.
The 2015 forecast cost of power ($56.20/MWh) is modestly higher than estimates at the commencement of commercial operations ($48/MWh-$54/MWh), but is down following a spike in the 2014 cost of $78.42/MWh, which stemmed largely from a planned fall outage, said Fitch.