Fitch Ratings said April 15 that it has assigned an ‘A-‘ rating to Public Power Generation Agency, NE (PPGA) revenue bonds.
These are approximately $139,940,000 of Whelan Energy Center Unit 2 revenue refunding bonds 2016 series A. The bonds are scheduled to price via negotiation on April 28. Proceeds from the 2016 series A bonds will be used to refund a portion of outstanding Whelan Energy Center Unit 2 revenue bonds 2007 series A for interest savings, and pay the costs of issuance.
In addition, Fitch affirmd the ‘A-‘ rating on about $187,345,000 of Whelan Energy Center Unit 2 revenue bonds, 2015 series A.
The Rating Outlook is Stable.
PPGA is a small joint action agency comprised of a mix of five municipal wholesale and retail electric providers located across a broad six-state region. The agency was created to finance, construct, own and operate the Whelan Energy Center Unit 2, which began commercial operation on May 1, 2011. Municipal Energy Agency of Nebraska (MEAN; rated ‘A’/Outlook Stable) and Heartland Consumers Power District (Heartland; rated ‘A-‘), are by far the largest participants, accounting for almost 75% the project entitlement shares. Each of the five participants exhibit solid credit fundamentals supportive of the ‘A-‘ rating.
The project’s cost of power has fluctuated since coming online in 2011, but remains largely competitive. Suppressed project output over the prior two fiscal years driven by low energy and natural gas prices has resulted in cost escalation and prompted a peak rate of $65.10/MWh in 2015. Despite the relatively higher cost, Fitch believes the project’s modest capital needs and emission-control technology should keep rates manageable over the longer term.
Whelan Energy Center Unit 2 is a 220-MW, pulverized coal-fired plant located near Hastings, Nebraska. The unit was constructed with the latest emissions controls technology, which should limit the scope of future capital needs. MEAN and Heartland each hold a 36.36% share in the project, providing both with 80 MW of associated capacity. The remaining 60 MW is allocated among the three remaining participants. PPGA sells the entire output of the 220-MW project to its five participants pursuant to participation agreements that extend through the final maturity of the related debt.
Fitch noted that project performance improved in 2013 following prolonged outages in the previous year related to an eight-week overhaul of the turbine generator and associated stop valves. The project’s equivalent availability factor (EAF) and net capacity factor peaked in 2013 at about 85% and 68%, respectively, before declining in 2014 as additional maintenance issues prompted extended outages. Operation of the unit was curtailed again in 2015 as the continuation of low natural gas prices and availability of low cost energy reduced the project’s output, resulting in a nearly 14% decline in energy sales.
Firm capital needs over the next five years are forecasted to be manageable, averaging about $1.7 million annually. However, the inclusion of contingent projects related to rail additions and scrubber ash water treatment could increase the five-year spending plan by an additional $7.5 million. Despite the additional costs, PPGA officials expect to continue funding capex entirely from accumulated reserves, Fitch added.