S&P: Anaheim, CA's Electric Utility Bonds Series 2016A-C Rated 'AA-'; Other Ratings Affirmed
At the same time, S&P Global Ratings affirmed its 'AA-' rating on parity senior (working) lien bonds issued on behalf of APU by the Anaheim Public Financing Authority (APFA), by the Southern California Public Power Authority (SCPPA) for its Canyon Power Project, and by the California Municipal Finance Authority (CMFA). S&P Global Ratings also affirmed its 'A+' rating on the CMFA's series 2015B subordinate-lien qualified obligations. The outlook is stable.
"The ratings reflect what we view as a deep and diverse customer base, solid financial metrics, and good liquidity," said S&P Global Ratings credit analyst Jeff Panger.
The city is issuing the approximately $93 million of series 2016A bonds to fund electric distribution system improvements, while the 2016B and 2016C bond proceeds will refund the APFA's debt issued for the APU.
We view APU's service area as a key credit strength. The electric utility serves a mature and diverse base of about 118,000 retail customers, and a population of more than 350,000. We view the customer base as large, diverse, and relatively well-balanced, with residential customers accounting for 21% of total sales, and commercial and industrial customers 27% and 35%, respectively, in fiscal 2016.
The stable outlook reflects the depth and diversity of the service area, which we expect will support revenue stability; a track record of solid coverage of fixed costs that are projected to remain at adequate levels; and good liquidity, which credit-supportive financial policies support and provides short-term cushion against budget variances.
We do not expect to raise the rating over the next two years, because the utility faces challenges and uncertainties regarding environmental mandates.
The rating could face downward pressure over the next two years if APU is unable to maintain adequate coverage levels consistent with our projections.