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.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's assigns Aa3 to Lansing Board of Water and Light's (MI) Utility System Revenue Refunding bonds, 2019B; outlook stable

02 Dec 2019

New York, December 02, 2019 -- Moody's Investors Service ("Moody's") has assigned a Aa3 rating to Lansing Board of Water and Light's (MI) (LBWL) $252 million Utility System Revenue Refunding Bonds, Series 2019B ("Series 2019B bonds"). The outlook is stable. The bonds are expected to price around December 12, 2019, subject to market conditions.

RATINGS RATIONALE

The Aa3 rating reflects our expectation that the consistently strong financial performance will continue owing to management's willingness to adjust rates as needed, which is of particular importance as LBWL transitions to primarily natural gas and renewable generation from its current mostly coal-fired generation fleet. LBWL continues to methodically manage this transition and is expected to maintain strong liquidity and financial margins to provide a cushion against any unexpected occurrences related to the construction, execution and implementation risks associated with the transition. After the transition is complete, LBWL's exposure to carbon transition risks will be notably reduced. The rating also incorporates LBWL's captive customer base, with strong governmental and institutional customers, provides a steady base for future demand and balances the exposure to the more volatile auto manufacturing industry in the region.

The rating could be negatively pressured if the credit quality of the city owner declines below current levels. The relationship with the city remains sound and the current 6.1% ROE agreement between LBWL and the city expires at the end of FY 2020. The outcome of this negotiation will be key to our forward view of LBWL's level of autonomy from the city. LBWL has approved the required rate increases on its services through FY 2020 and we expect LBWL to follow through with any needed future rate increases to ensure strong financial metrics are maintained as they have historically.

LBWL issued $320 million of Utility System Revenue Bonds earlier this year and plans to issue approximately $77 million in Variable Rate Demand Bonds in 2020 to fund additional costs for the construction of the new gas plant, as well as other capital improvements. The new bonds doubled LBWL's total leverage with Moody's adjusted debt ratio increasing to 61.9% in FY 2019 from 32.2% in FY 2018. Construction risk of the new plant has been adequately mitigated to date and the project remains on schedule and modestly under budget. Phase I of the gas supply line construction is expected to be completed eminently with Phase II already having about 90% of the required easements. The gas turbines are set to be ready for first fire by March 2021 and the plant is still on schedule to be operational by June 2021. The utility constructed a new 100 MW natural gas plant from 2011 to 2013 on time and on budget at about $180 million. Similarly, debt increased at the time of construction but owing to LBWL's fully amortizing debt profile, leverage has gradually declined since. We expect a similar dynamic with the debt issued for the new gas plant.

The construction of the new plant reduces LBWL's currently elevated carbon transition risk owing to its coal fired generation profile. The new 250 MW natural gas fired combined cycle power plant offsets LBWLs planned shutdown of Erickson by 2025 and the planned closure of Belle River by 2030, reducing coal exposure to zero by 2030. The new plant is coupled with new and existing solar, wind, hydro and other renewable PPAs. Thus, the new plant positions LBWL for long-term environmental risks currently associated with its older coal fired units that are reaching the end of their useful life.

While the plant does increase natural gas procurement exposure, LBWL has years of managing gas supply and with a larger demand base could capitalize on larger purchases in the future to better manage this cost. Lower long-term staffing needs will help reduce long-term labor costs. About one third of employees are eligible for retirement and the reduction in workforce over the next few years will help improve operating margins.

Moody's calculated net revenues increased materially by 20% in FY 2019 owing both lower PPA expenses and a modest increase in revenues from the rate increase. This net revenue growth coupled with lower debt service materially improved Moody's total adjusted net revenue debt service coverage ratio (DSCR) to 3.66x in FY 2019 from 2.04x in FY 2018, but we expect DSCRs to remain generally above 2.5x after the new debt begins to fully amortize post construction. Days cash on hand declined modestly to a still strong 230 days in FY 2019 from 252 days in FY 2018.

RATING OUTLOOK

The stable outlook reflects our view that LBWL will continue to adequately adjust rates in line with its projections to ensure financial metrics remain healthy to mitigate the construction and execution risks associated with transitioning its generation fleet to natural gas and renewables from primarily coal.

FACTORS THAT COULD LEAD TO AN UPGRADE

-LBWL successfully diversifies its generation fleet to mitigate its long-term exposure to carbon transition risks associated with its dominant coal-fired generation fleet while maintaining above-average financial metrics and competitive rates.

FACTORS THAT COULD LEAD TO A DOWNGRADE

-LBWL's financial performance weakens with Moody's debt service coverage ratio remaining below 2.0x and Moody's adjusted days cash on hand below 150 days.

-Incurrence of unexpected higher costs that results in higher leverage and pressures financial metrics.

-Deterioration of customer base that materially weakens demand and/or user affordability.

LEGAL SECURITY

The senior lien bonds are secured by a first lien on the net utility revenues of the LBWL. The rate covenant is on a forward-looking basis with net revenues required to be at least 1.25 times all debt service due in the next 12 months. The additional bonds test (ABT) allows for the inclusion of new net revenues to be derived from approved rate increases and certain customer growth and requires net revenues to cover maximum annual debt service on all debt, including the additional bonds, by 1.25 times in the last fiscal year within 15 months of the new debt issuance. The flow of funds includes a junior lien, which remains open but with no bonds outstanding. Surplus cashflows can be used for such purposes that LBWL deems to be in the best interests of the city.

The debt service reserve fund (DSRF) requirement is weak given it is a springing lien requirement that depends on LBWL's rating by two rating agencies. If LBWL is rated at least A and A2, the DSRF requirement is $0. If LBWL's ratings decline below to A- and A3 by two rating agencies, the DSRF requirement equals the lesser of (1) 50% of maximum annual total debt service, (2) 62.5% of average annual total debt service, or (3) 5% of the original aggregate face amount of each outstanding series of bonds. LBWL can satisfy the DSRF requirement with a letter of credit or a surety bond within 180 days or with excess cash flow in six semi-annual installments. Owing to LBWL's current ratings, the DSRF requirement is $0 for the Series 2019B Bonds.

USE OF PROCEEDS

The Series 2019B bond proceeds will be used to pay issuance costs and refund about $250 million of outstanding Utility System Revenue Bonds, Series 2011A for an estimated net present value savings of at least 15% of the refunded principal amount with no extension of maturity.

PROFILE

Lansing Board of Water and Light (LBWL) is a municipally-owned combined utility system with electric generation and transmission, water filtration, steam and chilled water services. The electric system is the largest and averages about 85% of total annual revenues while serving over 97,000 residential, commercial, and industrial customers in the greater Lansing area. LBWL generates the majority of its retail and wholesale power sales from owned and operated generation assets or through energy received through its partial ownership of Detroit Edison's Belle River Plant through the Michigan Public Power Agency. LBWL owns and operates water wells, a raw water transmission system, water conditioning facilities, and extensive water distribution system serving potable water to over 56,000 residential, commercial and industrial customers, steam generation boilers, a steam transmission and distribution system serving 170 customers, and a chilled water facility and distribution piping system serving 19 customers in the City of Lansing.

METHODOLOGY

The principal methodology used in this rating was US Public Power Electric Utilities with Generation Ownership Exposure Methodology published in August 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

John Medina
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Kurt Krummenacker
Additional Contact
Project Finance
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2020 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/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE 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 INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER 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. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS 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, ASSESSMENTS, OTHER OPINIONS, AND 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, ASSESSMENTS, OTHER OPINIONS OR  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.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND 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 its 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, ASSESSMENT, 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 credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service 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 credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit 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