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Moody's Assigns Aa2 Rating to Western Minnesota Municipal Power Agency's Proposed Bonds

Strategic Insights

— 1 min read

Moody's Investors Service has assigned a stable outlook and an Aa2 rating to Western Minnesota Municipal Power Agency's (WMMPA) proposed $27 million Power Supply Revenue Refunding Bonds 2025 Series A. This rating reflects WMMPA's strong financial metrics, the underlying credit quality of Missouri River Energy Services' (MRES) 61 municipal utility members, and a stable revenue stream from all requirements contracts with MRES. WMMPA's fixed obligation charge coverage (FOCC) ratio is expected to remain near 1.8x over the next two years, with liquidity in excess of 500 days. The rating also considers the agency's diverse generation mix, including 36% hydroelectric power, and its commitment to meeting renewable portfolio standards.

Key Takeaways:

  • WMMPA has a strong financial profile, with a FOCC ratio of approximately 1.8x and liquidity exceeding 500 days.
  • The agency has a stable revenue stream from all requirements contracts with MRES, with 59 of the 61 member contracts extending through January 1, 2057.
  • WMMPA's generation mix is diverse, with 36% of power derived from hydroelectric sources, 31% from market purchases, and 15% from the WMMPA-owned Red Rock Hydroelectric Project and the coal-fired Laramie River Station.
  • The agency plans to add a 145 MW natural gas power plant, which is expected to increase leverage but keep debt at a manageable level.
  • WMMPA is committed to meeting renewable portfolio standards, with a target of 100% carbon-free electricity by 2040.

Statistics:

  • WMMPA has approximately $560 million in debt outstanding.
  • The proposed bonds have a total of $27 million in issue size.
  • The Aa2 rating reflects WMMPA's consistently strong financial metrics, with a weighted average credit quality of MRES members in the A range.
  • The all requirements contracts with MRES represent the primary revenue source for the agency.
  • WMMPA's fixed obligation charge coverage (FOCC) ratio will remain near the historical average of 1.8x over the next two years.
  • The agency's liquidity will also remain a strength, with days cash on hand (DCOH) in excess of 500 days.

Sources:

  • Moody's Ratings (Moody's)
  • Western Minnesota Municipal Power Agency (WMMPA)
  • Missouri River Energy Services (MRES)
  • United States Municipal Joint Action Agencies (published in December 2022, available at https://ratings.moodys.com/rmc-documents/396803)

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