OREANDA-NEWS. June 05, 2015. Fitch Ratings has assigned an 'A+' rating to the following Florida Municipal Power Agency's (FMPA) project revenue bonds:

--Approximately \\$110,610,000 All-Requirements Power Supply Project revenue bonds series 2015B;

--Approximately \\$248,695,000 All-Requirements Power Supply Project refunding revenue bonds series 2015C.

The bonds are scheduled to price via negotiation the week of June 15. The series 2015B bonds will provide funds needed to repay draws under an existing credit agreement previously used to fund the termination of nine prior interest rate swaps. The series 2015C bonds will advance refund all or a portion of the ARP Series 2008A and Series 2009A bonds for level interest cost savings.

The Rating Outlook is Stable.

SECURITY

Outstanding bonds under the All-Requirements Project (ARP) are secured by participant payments made pursuant to full requirements power supply agreements.

KEY RATING DRIVERS

WHOLESALE ELECTRIC PROVIDER: FMPA is a mature project-based joint action agency providing both all- and partial-requirements projects to its 31 retail electric utility members dispersed throughout Florida.

OBLIGATIONS UNDER THE ARP: Participants in the ARP are bound to the project by power supply contracts subject to onerous provisions that make early termination cost prohibitive and therefore highly unlikely. Absent notification by the participants at least one-year in advance, the contracts automatically extend each year for one additional year, continuing the duration of the contracts at 30 years.

RATE FLEXIBILITY: Both FMPA and its project participants maintain the ability to make timely rate adjustments to recover variable fuel and other operating costs. Importantly, rate adjustments are not regulated by the State's Public Service Commission.

SATISFACTORY FINANCIAL METRICS: Financial metrics are typical of a wholesale system with annual debt service coverage approximating 1.10x and liquidity continuing at a modest, but acceptable level equal to about 120 days of cash on hand.

RATING SENSITIVITIES

CHANGES IN PARTICIPANT CREDIT QUALITY: The credit quality of the All-Requirements project participants will continue to be an important consideration in future rating actions.

RATE PRESSURE: While recent state legislation aimed at bringing the Florida Municipal Power Agency under the regulatory authority of the Florida Public Service Commission failed to advance, the previously proposed bill evidences the increasing political pressure the agency faces to limit rate increases. Maintenance of lower wholesale or retail electric rates at the expense of sufficient financial margins would be viewed negatively.

CONTINUATION OF ADEQUATE LIQUIDITY: Maintenance of healthy liquidity remains essential given the considerable exposure to variable rate debt obligations and related bullet maturities associated with the All Requirements Project debt.

CREDIT PROFILE

LARGE WHOLESALE POWER PROVIDER

FMPA is a project-based joint-action agency formed in 1978 to provide its members with a reliable and competitively priced power supply and related services. FMPA's 31 members are comprised of municipally owned electric utility systems serving an estimated two million residents located throughout Florida on a combined basis.

FMPA's ARP meets substantially all of the wholesale power requirements, as well as scheduling, transmission, and associated services, of its 13 active participants. The project's portfolio of owned generating assets and purchased power resources is sufficiently diversified by fuel mix, asset concentration, counterparties and operator.

AMPLE CAPACITY

Capacity is weighted towards natural gas-fired (approximately 80%) with coal-fired units making up the balance. Project-owned generating resources include assets that are solely or jointly owned by the project. The project also purchases capacity and energy owned by three of its participants (Fort Pierce Utilities Authority, Kissimmee Utilities Authority and the Utility Board of the city of Key West) pursuant to capacity and energy sales contracts that obligate FMPA to make fixed capacity payments to the participants. Power purchases directly from Southern Company provide the balance of needed resources.

The project's nearly 1,700 MW of available capacity exceeded its participants' non-coincident peak demand of 1,253 MW by a comfortable margin in fiscal 2014. Existing capacity is forecast to be sufficient to meet future load growth as well as a benchmark 18% reserve for summer peaking days through at least 2023. Annual load growth is projected at 1.4% annually, equal to about half the annual growth experienced in the years leading up to 2008. Aggregate energy sales increased by 2.1% in fiscal 2014 after declining by a similar percentage the prior year.

The ARP's wholesale rate is driven primarily by natural gas prices and is set to maintain a healthy monthly cash balance equal to a minimum of 60 days operating requirements, which it currently exceeds by a considerable amount. Multiple lines of credit totaling \\$100 million provide additional working capital to the ARP if needed.

AVERAGE WHOLESALE RATES

The project's average wholesale rate for fiscal 2014 declined nearly 5% from the prior year to \\$81.80/MWh. Despite a significant cumulative drop in the agency's rates since 2009 due to lower natural gas prices, FMPA's wholesale rate, based on the most recent data available, remains near the average of wholesale providers in Florida, but well above the state's lowest cost utility.

SATISFACTORY FINANCIAL RESULTS

FMPA reports separate audited financial results for each of its five power projects. Annual debt service coverage for the ARP has remained relatively consistent, averaging nearly 1.1x over the prior five fiscal years. A sharp increase in fixed costs in fiscal 2011 prompted coverage to fall below 1.0x, but operating margins rebounded in the subsequent years. Available cash and investments provided a solid 120 days cash on hand at the close of fsical 2014.

SOMEWHAT AGGRESSIVE DEBT PROFILE

Approximately 70% of the ARP's \\$1.05 billion of outstanding long-term debt (as of fiscal year-end 2014) was issued as fixed rate debt. The balance was issued as variable rate debt synthetically fixed through interest rate swaps with a diverse mix of counterparties. Collateral posting requirements vary with each swap, but are generally triggered by either a downgrade to 'BBB+' or below or by the combination of a rating downgrade to the 'A' rating category range and the mark-to-market value of the swap exceeding sizeable threshold amounts.

Debt amortization is fairly level, notwithstanding a one-year spike in principal associated with outstanding series 2011A-1&2 and 2011B bonds that occurs in fiscal 2019, Management has stated that FMPA will ultimately refinance the series 2011 bonds to produce a more level, albeit longer, pay-out schedule.