Fitch Ratings recently affirmed Connecticut Municipal Electric Energy Cooperative (CMEEC) and Connecticut Transmission Municipal Electric Energy Cooperative ratings at “AA-.”
The Rating Outlook is Stable.
Specifically, Fitch affirmed the following CMEEC and Connecticut Transmission Municipal Electric Energy Cooperative ratings:
CMEEC
• $9.9 million 2021 series A transmission services revenue bonds;
• $18.4 million 2022 series A power supply system revenue bonds;
• Issuer Default Rating (IDR).
Connecticut Transmission Municipal Electric Energy Cooperative
• $14.8 million 2021 series A transmission system revenue bonds.
Fitch said the affirmation of CMEEC'S IDR and CMEEC and TRANSCO's long-term bond ratings at “AA-“ reflect CMEEC's stable consolidated financial profile, “supported by its “Very Strong” revenue defensibility and “Strong” operating risk profile.”
The joint-action agency's “Very Strong” revenue defensibility “is underpinned by a very strong contractual framework that includes all-requirements wholesale power contracts with each of its six member utilities. CMEEC's ratings also reflect the strong credit quality of its largest members and the unfettered legal authority to set rates for members,” Fitch said.
“CMEEC's strong operating risk assessment is supported by a low operating cost burden, largely influenced by short- and medium-term market power purchases.”
These purchases subject the utility to potential variability in market pricing, Fitch noted. “However, this risk is partially mitigated by CMEEC's energy risk management policies. Capital spending needs are limited and will not require the utility to borrow funds.”
Based on preliminary fiscal 2024 financials, the utility's leverage ratio was 5.8x, largely unchanged from the previous year.
CMEEC's liquidity position also remained robust, equaling 202 days unrestricted cash and, when factoring $50 million in available liquidity facilities, CMEEC's liquidity cushion was 385 days, Fitch said.
“Fitch's scenario analysis indicates that leverage is projected to hover just above 6x in the base case and trend towards 6.5x in the rating case, while financial metrics continue supporting the overall rating. The system projects continued stable financial performance and minimal future capital spending.”
Moody's Ratings affirms Aa3 for Connecticut Transmission Municipal Electric Energy Cooperative
In early March, Moody's Ratings affirmed the Aa3 rating for approximately $16 million of outstanding Transmission System Revenue Bonds, 2021 Series A, issued by the Connecticut Transmission Municipal Electric Energy Cooperative (Transco).
The outlook remains stable.
“The Aa3 rating reflects Transco's stable and predictable revenues and cash flows, which are expected to continue, and the benefits of its strong ties through various financial, operational and contractual relationships with affiliated Connecticut Municipal Electric Energy Cooperative (CMEEC, Aa3 stable),” the rating agency said.
“Transco's credit profile also reflects the collective strength of the strong A-range weighted average credit quality of CMEEC's members and the relatively low risks inherent in the transmission business. In particular, Transco realizes cost benefits from its ownership of transmission assets.”
The stable outlook “reflects our expectation that the credit quality of CMEEC and its members will remain stable. We also expect that Transco will continue to exhibit sound financial metrics, risk management practices, and a solid liquidity profile.”
Dave Meisinger, CEO of CMEEC and Transco, indicated his appreciation of the thorough review and analysis conducted by both ratings agencies in their annual updates, noting that “CMEEC is fortunate to have long-term requirements power supply contracts with its member-owners, all of whom display strong underlying credit quality. Our ability to establish and maintain enterprise risk management policies reflecting our decades of evolving experience in the wholesale markets, and to self-govern our hedging, power procurement and general financial practices and wholesale rates under local governance and control, allows us to continue delivering on the public power value proposition that we present to our member communities.”
He said these “continued high grade credit rating affirmations help to reduce our debt burden while also limiting transaction costs associated with our energy hedging practices.”
