New York, October 28, 2021 -- Moody's Investors Service ("Moody's") has assigned an A1 rating to American Municipal Power, Inc. - Fremont Energy Center Project's $332.4 million Revenue Bonds Refunding Series 2021A. As of October 1st 2021, the Fremont Energy Center project had approximately $468 million of debt outstanding. The outlook is stable.
RATINGS RATIONALE
American Municipal Power, Inc. - Fremont Energy Center Project's (AFEC) A1 rating considers the project's strong bond security, which is anchored by the unconditional take-or-pay obligation of a diverse group of 86 municipal project participants to pay all O&M and debt service costs. AFEC's 86 participants consist of 85 municipal electric utilities and one municipal joint action agency, which all have strong cost recovery abilities. AFEC benefits from a fully funded maximum annual debt service reserve fund, sound plant operating performance, a 25% step-up provision, and access to AMP's revolving credit line facility.
AMP's operation of AFEC, a two unit 675 MW natural gas fired combined cycle facility, has provided power resource diversity and a reliable generation resource for AMP's members since it went into commercial operation in January 2012. AFEC has demonstrated a solid operating performance record, as measured by availability and capacity factors, since its commercial operation date. During 2019 and 2020 AFEC recorded availability factors of 75% and 79%, and capacity factors of 58% and 58%, respectively. From January through September 2021, AFEC recorded a 90% plant availability factor and a 58% capacity factor.
RATING OUTLOOK
The stable outlook reflects our expectation for continued sound plant operating performance, no material changes in AFEC's weighted average participant credit quality, and AFEC's continued sound financial performance given the take-or-pay contractual framework, including a good liquidity profile.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
- Participant credit quality strengthens
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
- Significant and extended deterioration in the plant's operating performance
- Participant credit quality declines
LEGAL SECURITY
The AFEC project revenue bonds are payable from and secured solely by the trust estate pledged under the indenture that includes a net revenue pledge by AMP. Each AFEC participant has a fixed project share, and the participant is required to pay AMP on a monthly basis an amount equal to its project share of AMP's revenue requirement. The payments are to be made as an O&M expense of the participant's electric system. The obligation to make payments are incorporated in the long-term take-or-pay contract such that the payments are not subject to any reduction, whether by offset, counterclaim, or for any other reason, nor shall they be conditioned on the performance of AMP, or any participant, and the payment shall be made whether the project is operable, operating, or for any other reason. There is a 25% step-up provision which means if it had to be exercised, the other participants in the AFEC project would have to step-up to 25% of their respective original project shares taking over any defaulted share.
USE OF PROCEEDS
Proceeds from the Series 2021A bonds will be used to refund a portion of the outstanding AFEC Project Series 2012B revenue bonds and to fund issuance costs. The refunding bonds will be structured to provide substantially level savings with a matched maturity structure.
PROFILE
AMP Fremont Energy Center (AFEC) is a natural gas fired, combined cycle, electric power generation plant with a capacity of 512 MW (unfired) / 675 MW (fired), consisting of two Siemens-Westinghouse combustion turbines, two heat recovery steam generators, and one steam turbine and condenser. AFEC's 86 participants are mandated to pay, on a take-or-pay basis, their share of AFEC's total costs as an operating expense of their respective electric system. AFEC went into commercial operation in January 2012 and has had a good operating record.
Headquartered in Columbus, Ohio, American Municipal Power, Inc. (AMP) is the nonprofit wholesale power supplier and services provider for 134 members in Ohio, Pennsylvania, Michigan, Kentucky, Virginia, West Virginia, Indiana, Maryland and Delaware.
METHODOLOGY
The principal methodology used in these ratings was US Municipal Joint Action Agencies Methodology published in August 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1207102. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.
The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
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