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Announcement:

Moody's assigns Green Bond Assessment (GBA) of GB1 to American Municipal Power's proposed Series 2019A green bonds

19 Dec 2018

First GBA assigned to an American Municipal Power green bond

New York, December 19, 2018 -- Moody's Investors Service has today assigned a Green Bond Assessment (GBA) of GB1 (Excellent) to American Municipal Power, Inc.'s (AMP, A1 stable issuer rating) proposed $56 million Solar Electricity Prepayment Project Revenue Bonds, Series 2019A (Green Bonds). Proceeds from the Series 2019A bonds will be used to refinance the prepayment for a specified supply of electricity from 13 solar photovoltaic generating facilities with an aggregate installed capacity of approximately 37 megawatts (MW), fund a deposit to a debt service reserve fund and pay costs of issuance. The Series 2019A bonds will be fixed rate obligations with final maturity in January 2044. The bonds are expected to price on January 8 and close on January 31.

"AMP's Series 2019A GB1 reflects the full allocation of proceeds to solar projects that are consistent with the Green Bond Principles," said Matthew Kuchtyak, a Moody's lead green bond analyst. "AMP is an experienced green bond issuer with an excellent track record of impact reporting on a quarterly basis in its sustainability reports."

ASSESSMENT RATIONALE

The GB1 reflects how AMP's net proceeds from the Series 2019A bonds will be primarily used to repay borrowings on a line of credit. These borrowings were initially drawn to finance the prepayment for a specified supply of electricity from initial "Solar Phase II" solar electricity generating facilities.

Solar Phase II initially consists of 13 solar generating systems with an aggregate rated capacity of approximately 37 MW. The initial systems are located in Delaware, Michigan, Ohio and Virginia, and range in capacity from 0.25 MW to 20 MW. Each system is interconnected to the electric distribution system of a host member and located at a site within or near the geographic footprint of that host member. The first initial system, located in Bowling Green, OH, entered commercial operation in January 2017. Power generated from the initial 13 solar facilities will provide energy to 22 AMP members located in Ohio, Virginia, Michigan, Delaware and Pennsylvania.

The Series 2019 transaction documents provide strong organization and governance around the Solar Phase II transaction. Furthermore, there is ample experience among AMP's employees, as well as at the developer of the solar facilities (DG AMP Solar, LLC, a subsidiary of NextEra Energy Resources LLC), for developing and operating renewable energy facilities. AMP has strong engagement in the green bond transaction and overall sustainability oversight from a number of internal teams. For example, the power supply group, project development group, generation group and environmental group all have responsibilities related to the development and performance of AMP's renewable energy projects.

AMP has a strong commitment to sustainability, and has been growing its renewable energy capacity in recent years. AMP owns and/or operates approximately 390 MW of run-of-the-river hydroelectric power generation at existing dams on the Ohio River, and is also evaluating other hydroelectric generating facilities. In addition, AMP entered into a Power Purchase Agreement for 52 MW of wind generation and has developed a 3.5 MW solar facility in Ohio. Solar Phase II will help grow AMP's renewable energy capacity, which is approximately 22% of its current overall energy resource mix.

After closing of the Series 2019A bonds, AMP will move to immediately repay the borrowings on the line of credit associated with the initial system prepayments, effectively eliminating the need for any short-term management of unspent bond proceeds. The full refinancing nature of the transaction further eliminates the need to track expenditures on projects over time or invest unspent bond proceeds on a short-term basis.

AMP has provided excellent disclosure on the green projects to be refinanced with the proceeds from the Series 2019A green bonds, including project-level detail, expected installed capacity of the facilities and the member communities who will receive energy generated from the solar facilities. AMP calculates the carbon dioxide (CO2), sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions avoided from its renewable energy facilities, including the solar generating facilities being refinanced by the Series 2019A green bonds. In Q3 2018, these solar facilities ran for 15,114 MWh, avoiding 7,164 tons of CO2, 5.74 tons of SO2 and 4.99 tons of NOx.

AMP has committed to provide reporting on the amount of green bond funds allocated to the Solar Phase II project and the associated environmental impacts. This reporting will extend over the life of the Series 2019A bonds and be included in the issuer's annual sustainability report and quarterly sustainability updates, which are published on the sustainability page of the issuer's website. Key performance indicators will include net renewable capacity (MW), net annual renewable generation (MWh), annual greenhouse gas emissions avoided (tons) and SO2 emissions avoided (tons). AMP already has a well-established track record of reporting on green bond use of proceeds and overall emissions avoided, indicating a high probability that this strong reporting will continue for the Series 2019A bonds.

AMP was formed in 1971 pursuant to state statute (Ohio Revised Code Chapter 1702) as a non-profit corporation to provide its members, municipal electric utilities, a reliable and competitive power supply. As of 1 December 2018, AMP had 135 members - 84 municipalities in Ohio, 29 boroughs in Pennsylvania, six municipalities in Michigan, five municipalities in Virginia, six municipalities in Kentucky (three of which are members through their electric utility boards), two cities in West Virginia, one city in Indiana, one town in Maryland and the Delaware Municipal Electric Corporation (DEMEC).

METHODOLOGY

The principal methodology used in this assessment was Green Bonds Assessment (GBA) published in March 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Matthew Kuchtyak
Lead Analyst
ESG Admin
Moody's Investors Service, Inc.
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James Hempstead
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

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