Fitch Ratings said Nov. 8 that the owners of the coal-fired Gibbons Creek power plant in Texas have decided to put the plant up for sale.
Fitch said it has assigned an ‘AA-‘ rating to the city of Garland, TX’s subordinate lien electric utility system revenue refunding bonds, new series 2016A and 2016B. Proceeds from the series 2016A bonds will refund outstanding series 2007 bonds and pay the costs of issuance. Proceeds from series 2016 will refund outstanding commercial paper obligations and pay the costs of issuance. The Rating Outlook is Stable.
The series 2016A and 2016B bonds are payable on a subordinate lien basis from net revenues of Garland, TX’s, electric utility system, known as Garland Power & Light (GP&L). GP&L serves approximately 69,000 retail customers in a strong service territory located just outside the city of Dallas. The utility also serves as a wholesale provider to several municipal and cooperative retail systems under varying contractual terms.
GP&L’s power supply remains sufficient to meet its retail needs, although market conditions have altered GP&L’s historical reliance on the Texas Municipal Power Agency‘s (TMPA) coal-fired power plant with a significant increase in market purchases and a growing amount of contracted renewable power. Directly owned natural gas-fired units are aging but provide valuable capacity and flexibility, Fitch noted.
GP&L is a municipally-owned, electric services provider serving a retail customer base of approximately 69,491 (fiscal 2015). The electric system also provides wholesale electric services to several municipal and cooperative utilities along with providing ancillary services in the ERCOT market. GP&L is an integrated utility with generation, distribution, and transmission assets.
Fitch noted: “The utility’s power supply is changing both in terms of technologies and fuel mix due to low natural gas prices and the increased competitiveness of renewable resources, particularly wind. GP&L’s historical reliance on coal has been reduced as market prices have eroded the competitiveness of TMPA’s Gibbons Creek Steam Electric Station (GCSES). In addition, recently contracted purchase power agreements (PPAs) for wind began delivering to the system in fiscal 2016, marking a transition towards a greater reliance on intermittent resources that will grow as additional resources begin commercial operations in fiscal 2017.”
Fitch added: “TMPA members, including GP&L, have authorized a potential sale of GCSES. Fitch views a potential sale as credit neutral for GP&L given the utility’s recently reduced reliance on the plant and its likely ability to replace the lost capacity and energy along similar or better economic terms.”
On the Nov. 10 agenda for the TMPA Board of Directors meeting is this item to be considered in executive session: “Request for Proposals relating to the sale of Gibbons Creek Steam Electric Station and the portion of the 345 kV transmission system in Grimes, Brazos, and Robertson counties (legal advice under Section 551.071, Government Code, value of real property under Section 551.072, Government Code, and competitive matters under Section 551.086, Government Code).”
The Gibbons Creek plant is located in Grimes County, with a net generating capability of 470 MW. The plant began commercial operation in October 1983.