Bond Agencies Upgrade and Affirm Lakeland Electric Rating
The City of Lakeland is very pleased to announce that two independent rating agencies, knowledgeable in utility business both affirmed or upgraded Lakeland Electric’s bond rating. Fitch Ratings reaffirmed Lakeland Electric’s rating to AA- while Standard & Poor’s Rating Services upgraded their rating to AA. Bond ratings are very important to prospective investors who purchase long-term bonds issued by utility companies. Utility companies typically have very large capital expenditures such as multi-million dollar power plants and utility bonds are used to finance many larger capital projects.
City Manager Doug Thomas said, “These rating agencies reflect an in-depth review of our financial condition including our extremely competitive base rates, customer demographic characteristics, base load generation diversity, fuel adjustment practices, utility debt and coverage levels, financial strength, short and long term capital planning, utility management expertise and municipal governance structure.” He added, “An administrative team recently travelled to New York to meet with rating agencies to review our overall operations and we were optimistic that we would be reviewed favorably and are obviously pleased with the announcements.”
The Standard & Poor’s upgraded rating report states that the higher rating reflects the opinion of the utility's stronger financial risk profile. The improvement began with the expiration in 2007 of uneconomic power sales contracts and continued with management's policy of increasing cash reserves, modest capital investment requirements that Lakeland will fund with revenue, and a gradual reduction in debt. The rating also reflects the view of the following credit strengths:
· Competitive rates. Lakeland Electric's base rate is among the lowest in Florida, and management's financial forecast shows continuing strong financial metrics without the benefit of base rate increases through 2016.
· A sizable and diverse service area. Growth is steady but moderate. The 10 largest customers account for less than 20% of revenue, and about half the annual revenue comes from residential customers.
· A dependable low-cost power supply. In addition to gas- and coal-fired base load units, Lakeland Electric shares a power pool with Florida Municipal Power Agency (FMPA) and the Orlando Utility Commission (OUC), which provides access to relatively low-cost power to supply peak demand.
Greg Finch, Finance Director for the City of Lakeland said, “Standard and Poor’s AA rating definitely puts Lakeland Electric in the upper tier of municipal power bond issuers, and better than the vast majority of IOU energy companies. By comparison, TECO and Progress Energy are rated BBB+ and FPL is rated A-. The AA credit rating in the highest it’s been since 1978.”
Lakeland Electric is a full service power provider with over 600 full-time employees that serve over 120,000 customers. The utility is the third largest public power provider in Florida generating over 1,100-megawatts and operating 2000 miles of transmission and distribution facilities. Lakeland Electric owns and operates one of the most efficient combined cycle gas units in the United States and has been on the forefront of emerging renewable energy sources. Based on current Florida Municipal Electric Association data, Lakeland Electric’s residential rates are the second lowest in the state for residential customers as well as the second lowest in Florida for all of the commercial rate classes.