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Moody's Investors Service Inc.

Moody's Downgrades Bonneville Power Administration's Rating and Affected Debt Obligations

Strategic Insights

— 1 min read

Moody's has downgraded Bonneville Power Administration's (BPA) issuer rating to Aa2 from Aa1 and revised its outlook to stable from negative, impacting various debt obligations, including Energy Northwest, WA - Project 1's electric revenue bonds and Morrow (Port of) OR's transmission facilities revenue bonds. This rating action is prompted by Moody's downgrade of the Government of the United States of America to Aa1 from Aaa and revision of the outlook to stable from negative. BPA's linkages with the US government, including its $13.7 billion borrowing line with the US Treasury and its dependency on the US government's credit quality, have led to a one-notch differential in BPA's rating.

Key Takeaways:

  • Moody's has downgraded BPA's issuer rating to Aa2 from Aa1, reflecting BPA's close linkages with the US government and its dependency on the US government's credit quality.
  • The ratings of BPA-supported debt obligations, including Energy Northwest, WA - Project 1's electric revenue bonds and Morrow (Port of) OR's transmission facilities revenue bonds, have been revised to Aa2 from Aa1, reflecting BPA's Aa2 issuer rating.
  • BPA's stable outlook reflects the stable outlook of the US government, while the outlooks of Project 1 and other affected bond issuers reflect the stable outlook of BPA.
  • Factors that could lead to an upgrade of the ratings include the US government's rating upgrade to Aaa, BPA's maintenance of a minimum net borrowing capacity under the US Treasury line in excess of $6 billion, and BPA's continued adherence to credit-supportive financial policies.
  • Factors that could lead to a downgrade of the ratings include the US government's rating downgrade, BPA's weaking of financial policies, or its diminished availability under the US Treasury line.

Statistics:

  • BPA's $13.7 billion borrowing line with the US Treasury will increase to $17.7 billion after FY2027.
  • BPA has $7.4 billion of non-federal debt created via operating contracts and $7.8 billion of federal debt, which is debt owed by BPA to the federal government.
  • BPA's rated, non-federal debt is supported by contracts that require BPA to pay on an unconditional basis.

Sources:

  • Moody's, US Public Power Electric Utilities with Generation Ownership Exposure (January 2023)
  • Moody's, US Municipal Joint Action Agencies (December 2022)
  • Moody's, Moody's Ratings Methodologies
  • Bonneville Power Administration, Profile and Information

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