Fitch Ratings action reaffirms Tri-State’s investment-grade financial ratings with a Stable outlook
Long-term issuer rating and short-term debt rating affirmed at A- and F1, respectfully.
Tri-State's outlook remains stable as Fitch Ratings cites very strong revenue defensibility characteristics, strong credit quality and low operating-cost burden.
Recognizing the importance of Tri-State contract termination payment proceedings, Fitch notes that decisions by Federal Energy Regulatory Commission (FERC) that are unfavorable to Tri-State regarding contract termination payments or timing of exit fee payments could lead to an immediate ratings downgrade.
(May 18, 2023 – Westminster, Colo.) Fitch Ratings today reaffirmed Tri-State’s long-term issuer rating at A- and short-term rating at F1. Fitch also maintained Tri-State’s ratings outlook at Stable. Tri-State’s ratings remain classified as investment grade.
In the ratings action, Fitch Ratings notes, “The affirmation of the 'A-' rating is driven by Tri-State's very strong revenue defensibility characteristics, which include all requirements wholesale service contracts, strong purchaser/member credit quality, and a low operating cost burden. Tri-State's financial profile remains strong in the context of its credit characteristics, notwithstanding the financial tightening that has occurred since 2021.” Fitch further noted that, “Tri-State’s revenue defensibility reflects the cooperative's long-term, full requirements wholesale power sales contracts with its members, which provides an unconditional payment obligation and the ability to reallocate costs among the members.”
“Tri-State remains financially strong, with sustained stable and lower wholesale rates for our members,” said Duane Highley, Tri-State CEO. “With the filing of a formulary wholesale rate with the Federal Energy Regulatory Commission to be effective in 2024, we will ensure our revenue requirements are met. Fitch Ratings appropriately recognizes the critical importance to our remaining members and Tri-State that our contract termination payment under review by the commission keeps our members and Tri-State whole and unharmed.”
Also in its rating, Fitch incorporates the uncertainty Tri-State is facing as the FERC will determine the ultimate membership exit fee methodology for the three Tri-State utility members that will terminate their wholesale electric service contracts in 2024 and 2025. The methodology proposed by Tri-State to establish a contract termination payment methodology has been filed with the commission and consideration is pending.
Fitch also noted that Tri-State’s power supply resources are sufficient to meet modestly growing member needs, and that ongoing efforts to diversify generation with renewables, retire coal-fired generation and pursue participation in an organized regional transmission market should help Tri-State manage its long-term power supply position and meet the transition targets outlined in its Responsible Energy Plan (REP) announced in January 2020.
Tri-State's REP includes goals for an 80% reduction in greenhouse gas emissions associated with Colorado wholesale electricity sales by 2030, relative to a 2005 baseline, and 50% renewable energy consumed systemwide by its members in 2025.
Tri-State is a power supply cooperative of 45 members, operating on a not-for-profit basis, including 42 utility electric distribution cooperative and public power district members in four states that together deliver reliable, affordable and responsible power to more than a million electricity consumers across nearly 200,000 square miles of the West. For more information about Tri-State, visit www.tristate.coop.
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Certain information contained in this press statement are forward-looking statements including statements concerning Tri-State’s plans, future events, and other information that is not historical information. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described from time to time in Tri-State’s filings with the Securities and Exchange Commission. Tri-State’s expectations and beliefs are expressed in good faith, and Tri-State believes there is a reasonable basis for them. However, Tri-State cannot assure you that management’s expectations and beliefs will be achieved. There are a number of risks, uncertainties and other important factors that could cause actual results to differ materially from the forward-looking statements contained herein.