Moody's issues positive credit opinion on MEAN
September 29, 2019
Moody’s Investor Service recently issued an overall positive stable credit opinion on the Municipal Energy Agency of Nebraska’s outstanding power supply revenue bonds, citing multiple strengths of the organization and its power supply participants.
“MEAN has an established track record of raising rates when necessary while providing competitively priced power to its participants,” the opinion summary stated. MEAN has lowered its targeted revenue requirement for four straight years. The targeted revenue requirement is the total net revenue required to cover MEAN’s cost of operation.
The opinion stated MEAN has managed the risks well of competing in wholesale power markets the past few years. These risks include cost pressures such as higher transmission costs, price volatility and reduced ability to sell power to non-participants which can heighten pressure to increase rates to participants. The opinion cited credit strengths and challenges moving forward. The strengths listed were:
- Average weighted participant credit quality
- Strong rate setting ability with improved fixed cost recovery mechanism
- Diverse power supply mix
- Solid liquidity reserves and no near-term debt needs
The challenges cited included stable but modest fixed charge coverage ratios, risk of regulatory requirements and associated costs, and a transition risk to lower-carbon emitting resources.
Considerations that factored into the overall opinion included MEAN’s diversified pool of participants with positive credit quality, MEAN’s strong rate setting ability, and rate competitiveness despite wholesale power market cost pressures.