Fitch Ratings has affirmed the 'F1' ratings on Basin Electric power
Cooperative's (Basin) two commercial paper (CP) programs:
--$129,925,000 Mercer County, North Dakota Pollution Control Refunding
Revenue Notes, 2009 Commercial Paper Series One (Basin Electric Power
Cooperative-Antelope Valley Unit 1 and Common Facilities) (tax-exempt);
--$500,000,000 commercial paper notes (taxable).
SECURITY
Basin's tax-exempt and taxable CP notes are general unsecured
obligations of the cooperative.
KEY RATING DRIVERS
LONG-TERM RATING AND DIVERSE LIQUIDITY: Basin's 'A+' long-term credit
rating (senior secured obligations) and internal liquidity sources
support the 'F1' rating on its CP programs.
SOLID LIQUIDITY COVERAGE: Total internal liquidity resources provide
sufficient coverage of maximum potential requirements, in excess of
Fitch's 125% threshold. The cooperative reported $253 million of cash
and cash equivalents at April 30, 2016, and maintains three revolving
credit facilities totaling $1.03 billion to support its tax-exempt and
taxable CP programs.
SOUND CORE OPERATIONS: Basin's electric operations provide the
cooperative with overall financial stability, and its low wholesale
rates provide flexibility to generate additional revenues. Basin's
for-profit synthetic natural gas (SNG) subsidiary, which is included in
consolidated operations, produces more volatile results reflecting
market prices for natural gas and other commodity-based products.
RATING SENSITIVITIES
LONG-TERM RATING AND LIQUIDITY: Maintenance of an 'A' category long-term
rating, as well as robust cash and cash equivalents and access to
sufficient liquidity facilities, should continue to support the 'F1'
rating on Basin Electric Power Cooperative's commercial paper program
for the foreseeable future.
CREDIT PROFILE
Basin is one of the largest G&T cooperatives in terms of total assets,
megawatt-hours (MWh) generated and service area. It provides wholesale
electric service, under long-term contracts, to about 138 members, who
directly or indirectly serve approximately 2.9 million people throughout
a diverse service area that includes nine states in the Midwest and
Western U.S. The service areas are largely rural, with several seeing
increased growth in energy related industries.
GOOD LIQUIDITY AND LONG-TERM RATING
Basin's sufficient internal liquidity and 'A+' long-term rating support
the 'F1' short-term ratings on the cooperative's tax-exempt and taxable
CP programs. Liquidity sources include $252.6 million of Basin's own
cash and investments (as of April 30, 2016), as well as three revolving
credit facilities available to support its CP programs.
A $130 million credit facility provided by National Rural Utilities
Cooperative Finance Corporation (rated 'A/F1') expires in November 2018
and is specifically designed to support the tax-exempt program.
A $500 million syndicated credit facility of 10 banks (all rated 'F1' or
higher by Fitch) available through November 2019, and a separate 10-bank
$400 million credit facility available through 2018 support issuance
under the taxable program and provide liquidity for general corporate
purposes.
Events of default under the credit facilities include not meeting
coverage requirements, minimum equity thresholds and nonpayment by the
cooperative's subsidiaries. However, none of the four relevant
subsidiaries have outstanding debt in excess of what is defined in the
agreements as 'material indebtedness'.
SOLID BALANCE SHEET AND OTHER RESOURCES
Although various bank authorizations and incumbency certificates are in
place, the timing provisions in Basin's dealer and credit facility
agreements could provide a limited window for fully accessing bank funds
in the very unlikely event of a failed rollover. Basin's more than $150
million of balance sheet resources is therefore an important
consideration of the rating.
LONG-TERM RATING
For additional information on Basin's 'A+' long-term rating, see Fitch's
press release dated May 20, 2015, and available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria
Revenue-Supported Rating Criteria (pub. 16 Jun 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012
U.S. Public Power Rating Criteria (pub. 18 May 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864007
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004218
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004218
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE
RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
WEBSITE.
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