Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Update:

MOODY'S AFFIRMS Aa3 RATING ON TRANSMISSION AGENCY OF NORTHERN CALIFORNIA; STABLE OUTLOOK

02 Aug 2011

RATING ACTION AFFECTS $396.7 MILLION REVENUE BONDS OUTSTANDING

Electric Utilities
CA

Opinion

NEW YORK, Aug 2, 2011 -- Moody's Investors Service has affirmed the credit rating of Aa3 on the Transmission Agency of Northern California's outstanding $396,675,000 Transmission Project Revenue Bonds. The bonds have a stable outlook.

RATINGS RATIONALE

The bonds previously issued were for the purpose of constructing and maintaining the Central Oregon Transmission Project (COTP) , a 339-mile 500 kv transmission line and related facilities interconnecting the power markets of northern California and the Pacific Northwest.

The rating affirmation takes into consideration the very strong long-term economic value of the Central Oregon Transmission Project to the participants which is heavily weighted in the rating; the limited competitive risk and the strong COTP operational performance record; the sound take-or-pay contract terms; fully funded maximum annual debt service reserve and the A1 weighted average underlying rating of the TANC participants. Also considered is the agency's weak debt structure with significant auction rate securities and variable rate debt.

OUTLOOK:

The credit rating outlook is stable reflecting the sound performance record including high availability of the COTP; the long-term economic value of the project to member utilities; and the A1 credit quality of participants.

What Could Change the Rating UP: The rating could be upgraded if the participant's credit quality improved and the performance record continued to improve.

What Could Change the Rating DOWN: The credit rating could go down if the project performance record weakened or TANC participant's credit quality deteriorated. Also, TANC's inability to move forward on its plan to restructure its auction rate securities and other variable rate debt should rating triggers or weaker liquidity providers prevail would be a cause of a rating downgrade.

RECENT DEVELOPMENTS:

1. FY 2012 budget with FY 2013 projections include a small reduction in both revenue requirements and debt service costs. No major capital improvement projects are projected. CIP for 2013 is at $2.8 million.

2. A new joint powers agency was formed called the Balancing Authority of Northern California. TANC had to modify some of its agreements to reflect the operation of the COTP in BANC area.

3. Turlock Irrigation District, California (12.3% of agency obligation) was downgraded from A1 to A2 in July 2011.

4. Dexia, TANC's liquidity facility provider for the standby bond purchase agreement related to the 2002 Series A Variable Rate Demand Obligations, was downgraded to A3 from A1 in July 2011 but still maintains a P-1 rating.

BOND SECURITY PROVISIONS:

Bond security is the pledge of TANC's revenues, which are primarily derived from take-or-pay agreements with a 25% step-up requirement with various northern California public utilities. The contract payments are O&M expenses of the participants. The bonds are authorized by the indenture of Trust and by Articles 10 and 11 of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California. Payments under the Project Agreement No.3 take-or-pay contracts are required even if the project is inoperable or terminated. The contracts have not been tested in state courts but the participants have authorization as electric utilities to enter into the contracts pursuant to the state's Constitution or a city's Home Rule Charter.

The project participants are: Sacramento Municipal Utility District (27.56%); Santa Clara (20.47%); Modesto Irrigation District (MID) (21.30%); Turlock Irrigation District (12.54%);Redding (8.41%); Palo Alto; (3.68 %); Plumas-Sierra (0.147%); Roseville (2.11%); Lodi (1.92%); Alameda (1.23%); Lompoc (0.19%); Ukiah (0.19); Healdsburg (0.25).

TANC has pledged in the indenture to establish and collect rates and charges for sum sufficient payment of debt service and operating expenses and other required deposits. Fully funded maximum annual debt service reserve on outstanding debt; TANC has option structuring future debt issuance with debt service reserves at 25% maximum annual debt service. Current debt service reserve is at maximum annual debt service which represents level debt service.

INTEREST RATE DERIVATIVES:

TANC's variable rate and auction rate debt is fully hedged. TANC's 2002 Series A Variable Rate Demand Revenue Bonds are supported by a liquidity facility provided by Dexia (rated A3/P-1). TANC has begun the process to assess the replacement of the liquidity facility should Dexia remarketing rates remain high. TANC's 2003 A auction rate securities failed auction rate formula is currently 225% of 1 month LIBOR or 40bps.

TANC has interest rate swap agreements with Goldman Sachs Mitsui Marine Derivatives in notional amount of $76,190,000 related to the 2002A bonds. The market exposure is negative at $19.5 million with termination event triggered if TANC rating falls below A3. In connection with the 2003 A and B bonds, TANC has an agreement with J.P. Morgan Chase Bank in notional amount of $109,020,000 and market exposure at negative $9.5 million. Interest rate swap with Citibank has notional amount of $72.7 million and market exposure of negative $6.5 million. Additional termination triggering event would be if either SMUD(rated A1) , MID(rated A2), TID (rated A2) or Santa Clara's( rated A1) rating fell below A3.

CREDIT FUNDAMENTALS

STRENGTHS

* The average weighted underlying credit quality of the TANC participants is in the A1 range

* Strong economic take or pay contracts

*TANC's California-Oregon Transmission Project (COTP) holds significant economic value as a transmission line that connects northern California to the abundant economic hydro-electric energy from the Pacific Northwest and represents a significant weight in the rating

*Project performance has been sound since inception with high transmission line availability

*TANC has conservative budgeting and maintains a sound liquidity level

*TANC participant municipal electric utilities have competitive retail rates on average significantly lower than neighboring IOU rates

CHALLENGES

*Continued evolution of transmission regulation in California ( COTP is not part of Cal ISO)

*Single project risk should COTP become inoperable but participants have a take-or-pay obligation for all costs

*Significant reliance on auction rate and variable rate debt, although fully hedged

*Uncertain impact of the California ISO Integrated Balancing Authority Area proposal which may impact all municipal transmission line projects

*Mandatory compliance with electric reliability standards that have been approved by the North American Electric Reliability Corporation and the Federal Energy Regulatory Commission (FERC) to promote reliable operation of the bulk electric system

RATING DRIVERS:

1- COTP TRANSMISSION PROJECT HAS LONG-TERM ECONOMIC VALUE TO TANC PARTICIPANTS

The fundamental credit strength of TANC is the long-term economic value of the California-Oregon Transmission Project (COTP) which links the low-cost hydroelectric resources of the Pacific Northwest with central California. COTP is a 339-mile,1600 MW,500 kilovolt alternating current (AC) transmission project that has been in commercial operation with a high availability record since March 17, 1993. TANC participants benefit from wholesale market purchases of energy and bilateral contracts with Bonneville Power Administration (BPA) (rated Aaa); City of Seattle (Light) (rated Aa2) and several other Pacific Northwest utilities. The project is operated in coordination with the Pacific AC Intertie as part of the 4,800 MW California-Oregon Intertie (COI). Almost 20% of northern California's peak load can be served by this intertie.

TANC is a joint power agency currently consisting of 15 members. Each member pays for all costs associated with the operation of TANC and is entitled to an undivided interest in all rights and properties of TANC.

TANC is governed by a commission with commissioners representing each agency member. Sacramento Municipal Utility District serves as TANC treasurer and controller. TANC is part of the Western Area Power Administration sub-control area of the SMUD control area.

TANC is the major owner and operates COTP (86.9%), with Western Area Power Administration(WAPA) at (9.37%) and several smaller participants owning the balance of the project.

2- SIGNIFICANT ECONOMIC VALUE OF THE COTP IS FUNDAMENTAL CREDIT STRENGTH

The significant economic value of the COTP can be estimated by replacement cost estimates ($500 million as per agency) to build a new transmission line in California to replicate COTP. Such replacement cost has been estimated to be far in excess of the current debt outstanding. COTP was the last major transmission line built in northern California and permitting and constructing a new lines is limited and expensive.

Another approach to estimate the value of the COTP to TANC members would be to compare the price of energy traded at the California-Oregon Border (COB) hub versus an alternative location in California where members could purchase energy such as the NP-15 hub. Particularly in late Spring when there is excess hydroelectricity in the Pacific Northwest, there is a significant price differential which is favorable to TANC members. (COB energy price is in $20/mwh range while Cal ISO price ranges with natural gas price in $40-$70/mwh price range). In addition, TANC makes available any excess transmission capability to third parties. The COTP also provides access to resource diversity to TANC participants including access to the non-carbon energy resources and also provides transmission service to transmit energy from owned generation projects of several TANC members.

3-PARTICIPANT CREDIT QUALITY WEIGHTED AVERAGE CREDIT QUALITY OF A1

The weighted average credit quality of TANC's 15 participants is A1. Over 90% of the project allocation based on the share of the TANC debt outstanding is that of the top six electric utilities that have a weighted average rating of A1 on their electric revenue bonds. Sacramento Municipal Utility District (SMUD, rated A1) , Modesto Irrigation District (MID, rated A2) and Turlock Irrigation District (TID, rated A2) are districts governed by independent boards that can establish rates without external regulation. The other participants are municipal electric utilities that are also unregulated. Competitive retail rates, satisfactory financial operations and a still recovering regional economy are factors that describe the TANC participants.

4-SOUND PROJECT FINANCIAL PERFORMANCE WITH INDEPENDENTLY SET RATES TO RECOVER COSTS

The indenture for the TANC Project bonds establishes standard covenants for a municipal joint power agency. Transmission rates charged participants are to be sum-sufficient to meet debt service and O&M and other deposits. TANC has an established sound record of meeting its covenanted debt service coverage requirement. Financial results for FY 2010 included a debt service coverage ratio at 1.04 x. Estimated FY 2011; budgeted FY 2012 and projected FY 2013 results indicate same expected coverage ratio. TANC can establish its rates and charges without state regulatory board approval. TANC charges rates for service on the basis of the average price per kilowatt-year, as determined by the annual "cash basis" revenue requirement.

TANC has satisfactory liquidity given the limited operating risks it faces with a board objective of 60-days cash on hand that it regularly far exceeds. In 2010, adjusted days cash on hand was over 500 days cash on hand. The large reserve is to mitigate single project risk.

5-CAPITAL PLAN: NO ADDITIONAL BORROWING IN NEXT YEAR

TANC has no new borrowing plans over the near term.

KEY INDICATORS:

System Description: TANC is a joint powers authority (JPA) consisting of 15 Northern California public power utilities. TANC provides electric transmission service to be used by its members. TANC is project manager for the COTP. TANC board is comprised of one commissioner from each member utility.

TANC Rated Debt: as of 5/1/2011:

Series 1990: $19,605,000

Series 2002 A: $76,190,000

Series 2003: A and B; $181,700,000

2009 Series A 119,190,000

COTP Ownership:

TANC: 86.85%

WAPA: 9.37%

PG&E: 2.06%

TANC Debt Service Coverage, 2010: 1.04 x

TANC Debt Ratio, 2010: 110.6%

Operating Revenues, 2010: $59,449,000

KEY CONTACT: Noreen Roche Carter, Treasurer (916) 732-6509

The principal methodology used in this rating was U.S. Municipal Joint Power Agencies published in September 2007. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, and public information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Dan Aschenbach
Analyst
Public Finance Group
Moody's Investors Service

John Medina
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S AFFIRMS Aa3 RATING ON TRANSMISSION AGENCY OF NORTHERN CALIFORNIA; STABLE OUTLOOK
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​
Moodys.com