S&P Global Ratings issues report on Tri-State investment-grade ratings
Ratings agency cites recognition of deferred revenue to stabilize wholesale rates and uncertainty in federal regulatory processes in lowering senior secured debt rating.
Tri-State’s ratings remain classified as investment grade, with S&P acknowledging plans to accelerate the amortization of portions of its debt balances in the event of member exit and sharply reduce carbon emissions, as well as benefits of FERC regulation of rates and exit fees.
Short-term debt rating remains unchanged.
(April 25, 2023 – Westminster, Colo.) – Citing factors including the recognition of deferred revenue to stabilize wholesale rates to its members as Tri-State navigates ongoing Federal Energy Regulatory Commission (FERC) wholesale rate and contract proceedings, S&P Global Ratings lowered the not-for-profit wholesale power supplier’s senior secured debt rating to ‘BBB’ from 'BBB+', with a negative outlook. At the same time, S&P affirmed its 'A-2' rating on Tri-State's commercial paper program.
In April 2021, Tri-State and its members agreed to reduce wholesale rates 4%, place a moratorium on wholesale rate increases, and file a new wholesale rate with the FERC. Tri-State's wholesale rates for its members have been stable or lower since 2017, with the 4% wholesale rate reduction lowering member power supply costs $62.6 million in 2021 and 2022.
As a cooperative utility, Tri-State is recognizing deferred revenue set aside to stabilize wholesale rates and mitigate upward cost pressures spurred by significant inflation and supply chain challenges. Tri-State expects to meet its financial covenants for 2023, and will file a member-developed wholesale rate with the FERC intended to be effective Jan. 1, 2024.
“Our focus on reliability and affordability has kept wholesale rates flat or lower for seven years, sustaining cost savings at a time when inflation, supply chain pressures and rising energy costs are affecting rural communities,” said Duane Highley, Tri-State CEO. “Our members’ and board of directors’ consideration of a formulary rate design filing with the Federal Energy Regulatory Commission will ensure that our costs are recovered and that Tri-State can maintain its strong financial position.”
Tri-State’s ratings remain classified as investment grade, and Tri-State maintains its strong financial position. In its report, S&P notes several factors that temper exposure, including Tri-State's plans to accelerate the amortization of portions of its debt balances in the event of member exit, Tri-State's plans to sharply reduce its carbon emissions through coal plant retirements and additions of renewable resources, and FERC regulation of rates and exit fees. A Commission order on the member-developed Contract Termination Payment (CTP) is expected this summer.
“In 2023, we expect clarity on vitally important contract termination payment issues from the Federal Energy Regulatory Commission,” Highley said. “S&P correctly notes the important role of the Commission to address member exits and concerns with cost shifting.”
S&P notes that revising its outlook to stable will depend on factors including the acceptance of Tri-State’s new wholesale rate, the adequacy of compensation Tri-State receives from departing members as a result of FERC’s CTP decision, and Tri-State’s ability to transition following member exits.
“Through our clean energy transition, we’re working to ensure that our members will not only have among the cleanest, most reliable and lowest-cost energy portfolios in the nation, but also have the flexibility to achieve their individual goals, all while maintaining strong financial performance,” said Highley.
Tri-State is 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.
Lee Boughey, 303-254-3555, firstname.lastname@example.org
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Certain information contained in this press statement are forward-looking statements including statements concerning Tri-State’s plans, compliance with financial covenants, 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.