OREANDA-NEWS. Fitch Ratings has affirmed the following ratings for Florida Municipal Power Agency's (FMPA) project revenue bonds:

--$35 million Stanton Project revenue bonds, series 2009A and 2008 at 'A+';

--$145.1 million Stanton II Project revenue bonds, series 2012A, 2009A, 2004 and 2000 at 'A+';

--$1.7 million Tri-City Project revenue bonds, series 2009A at 'A+';

--$301.3 million St. Lucie Project revenue bonds, series 2012A, 2011A and B, 2009A, 2002, 2000 (consisting of series 2002-1, 2002-2 and 2002-3) at 'A'.

The Rating Outlook is Stable.

SECURITY

Outstanding bonds under the St. Lucie, Stanton, Stanton II and Tri-City projects are secured soley by revenues received by FMPA from those project participants in each respective project pursuant to applicable power sales contracts and project support contracts.

KEY RATING DRIVERS

WHOLESALE ELECTRIC PROVIDER: FMPA is a mature project-based joint action agency providing both all- and partial-requirements projects to its 31 retail electric utility members dispersed throughout Florida.

STRONG PARTICIPANT CREDIT QUALTIY: The ratings on FMPA's power projects reflect the generally strong credit quality of the largest participating members in each respective project. There is no cross-support between projects.

TAKE OR PAY OBLIGATIONS: Take-or-pay contracts require payment of all project costs, including debt service on the bonds, whether or not each of the projects are operating or operable. Obligations under these contracts are paid as an operating expense of each participant. Absent the supply of energy from any of the four projects in any month, participants would then be obligated to make payments under the project support contracts, which require only the fixed cost portion (primarily debt service) of the project's total costs be satisfied by the participants.

CONTRACT STEP-UP PROVISION: The power sales contracts for the Stanton, Stanton II and St. Lucie and Tri-City projects include a standard step-up provision that requires each participant to purchase up to 125% of its original project allocation in the event that another participant defaults. The step-up provision protects bondholders in the event of a default by the smaller project participants. For the smallest of FMPA's projects, Tri-City, the step-up provision would not fully cover a default by any of the participants. Therefore, the rating reflects the credit characteristics of all three participants.

RATE FLEXIBILITY: Both FMPA and its project participants maintain the ability to make timely rate adjustments to recover variable fuel costs. Importantly, rate adjustments are not regulated by the State's Public Service Commission.

SATISFACTORY FINANCIAL METRICS: Each of the projects exhibit a satisfactory financial profile relative to their operating and capital needs.

AGGRESSIVE DEBT PROFILE: The one-notch distinction in the St. Lucie Project rating reflects the credit quality of the largest project participants and the project's aggressive debt profile, structured to a large extent with auction rate securities (ARS) with bullet maturities.

RATING SENSITIVITIES

CHANGES IN PARTICIPANT CREDIT QUALITY: The credit quality of the respective project participants will continue to be an important component in future rating actions.

MAINTENANCE OF ADEQUATE LIQUIDITY: Preservation of healthy liquidity levels at FMPA remains essential given the considerable exposure to variable rate debt obligations and related bullet maturities associated with the St. Lucie and Stanton II projects.

CREDIT PROFILE

PROJECT OVERLAP

FMPA is a project-based joint-action agency formed in 1978 to provide its members with a reliable and competitively priced power supply and related services. FMPA's 31 members are comprised of municipally owned electric utility systems serving on a combined basis an estimated two million residents located throughout Florida. The majority of the members participate in multiple FMPA projects. Each of the agency's power supply projects were individually financed and separately secured to provide cost-based power to each of the participating members.

FMPA's members are a diverse group of small to medium sized electric utility systems serving primarily residential end users. Service area characteristics for the bulk of the members are believed to be sound, as are financial profiles of the vast majority of the member systems.

STRONG CONTRACTS
Long-term, take-or-pay power sales contracts and project support contracts extend well beyond the current maturity of outstanding bonds issued to finance each of the projects. The power sales contracts for each of the projects require participant payments be sufficient to cover all project related costs, including debt service and any variable costs, when capacity and energy are made available. Project payments are made as an operating expense of the participating electric utility, paid before any utility debt service payments are funded.

Project payments under the project support contracts would be subordinate to operating and maintenance expenses and direct debt service obligations of the participating utilities. While the project support contracts remain a slightly weaker structure than absolute and unconditional take-or-pay power sales contracts, Fitch believes the contract structure sufficiently obligates the project participants to continue to support debt service payments on FMPA's outstanding debt.

A 25% step-up provision is included in each of the power sales contracts, providing bondholder protection from a default of one or more participants. Consequently, the project ratings are limited to the weakest of the participants where entitlement shares of project output would not be sufficiently covered by the remaining participants in each of the projects.

PARTICIPANT CREDIT QUALITY
Each of the project ratings continues to reflect the general credit quality of its participants. The Stanton project has six participants, including Vero Beach, FL (electric revenue bonds rated 'A+'/Outlook Stable), Ft. Pierce Utilities Authority (FPUA; rated 'A+'/Outlook Stable) and Kissimmee Utility Authority (KUA; electric system revenue bonds rated 'AA-'/Outlook Stable), which account for about 70% of total entitlement shares.

The St. Lucie Project has 15 participants. Five of the top eight participants representing 50% of the entitlement shares are rated 'A+' or higher by Fitch. The city of Lake Worth, the largest participant, is not rated by Fitch, although the credit quality of the city of Lake Worth is supportive of the project rating in Fitch's view.

Tri-City has three participants, only one of which is rated by Fitch (FPUA). Despite the step-up provision for this project, bondholders have direct exposure to all three participants. The other two participants are the city of Homestead and the Utility Board of the City of Key West (dba Keys Energy Services), both of which Fitch believes are of sufficient credit quality to support the rating on the bonds.

FLEXIBLE RATE STRUCTURES

Neither FMPA nor its members are subject to regulation by any regulatory agency at the state or federal level. Most project participants maintain competitive retail rates, despite FMPA's above average wholesale rates and the common practice of providing sizeable transfers of electric fund revenues to their respective municipal general fund. Importantly, FMPA and its participants have the ability to recover fuel costs in a timely manner with their own pass-through of fuel charges.

STABLE SERVICE TERRITORIES

Neither FMPA nor its members are subject to rate regulation by any regulatory agency at the state or federal level. The vast majority of participants maintain competitive and affordable retail rates, despite the common practice of providing sizeable transfers of electric fund revenues to the general fund of the municipalities being served. Importantly, FMPA and its participants have the ability to recover fuel costs in a timely manner with their own pass-through of fuel charges.

MANAGEABLE DEBT PORTFOLIOS

Debt outstanding under both the Stanton and Tri-City Projects is fixed rate with level debt service. Neither project is party to any interest rate swap agreements.

Annual debt service payments associated with the Stanton II project is level until 2028 when a bullet principal payment is due, prompting total debt service to double for that year. A substantial portion (45%) was issued as auction rate securities (ARS) with multiple interest swaps with three seperate counterparties.

About half of the total outstanding debt under the St. Lucie project was also issued as ARS with multiple bullet maturities. While the project's sizeable exposure to variable debt with bullet maturities occurring in 2022 and 2027 remains a concern, the risk is somewhat less pronounced compared to prior years when variable rate obligations represented nearly 75% of the project's total debt portfolio. Management intends to continue refunding the outstanding ARS over time and eliminate the large spikes in debt service.