OREANDA-NEWS. Fitch Ratings has affirmed the 'A+' rating on the following Massachusetts Municipal Wholesale Electric Company (MMWEC) power supply project revenue bonds:

--\\$20 million nuclear project No. 3;
--\\$21 million nuclear project No. 4;
--\\$7 million nuclear project No. 5;
--\\$65 million nuclear project No. 6.

The Rating Outlook is Stable.

SECURITY

The bonds are separately secured by the revenues of the four respective nuclear power projects. Revenues are derived from payments received by MMWEC for each project, pursuant to take-or-pay sales agreements (PSA) with each of the project's municipal participants.

KEY RATING DRIVERS

LOW-COST WHOLESALE POWER PROVIDER: MMWEC is a project-based joint action agency providing competitive cost power and energy principally to 28 Massachusetts municipal light departments.

SOLID PROJECT PARTICIPANTS: The solid credit quality of the participants, most of which are part of multiple MMWEC projects, underpins the 'A+' rating on the bonds. The participants maintain generally strong balance sheets, with little to no electric system debt and sound liquidity. Many participants exhibit favorable wealth and employment levels.

COURT-VALIDATED TAKE-OR-PAY CONTRACTS: Long-term PSAs with the participants have been court-tested to ensure their enforceability. The participants are required to pay all monthly project costs from operating expenses of their respective utilities, including 10% in excess of MMWEC's annual debt service costs.

STEP-UP AND RESERVE FUND PROTECTION: A 25% step-up provision for nuclear project Nos. 3-5 and a well-funded debt service reserve for project No. 6 increase bondholder protection against a possible default of the weaker participants. Following the July 1, 2016 debt payments, existing reserves will be sufficient to cover the remaining nuclear project debt service through maturity.

ADEQUATE NUCLEAR OPERATING PERFORMANCE: Performance metrics for Millstone Unit No.3 and Seabrook Unit 1 have been in-line with industry standards for the past five years.

RATING SENSITIVITIES

CHANGE IN PARTICIPANT CREDIT QUALITY: A shift in the financial or economic position of Massachusetts Municipal Wholesale Electric Co.'s nuclear project participants (28 municipal electric departments) could lead to a rating change.

WEAK NUCLEAR OPERATING PERFORMANCE: Unlikely and extended poor operating performance at the nuclear units that affects the municipal participants' ability to meet their total project payments, could likewise lead to a rating change.

CREDIT PROFILE
MMWEC is a project-based joint action agency providing bulk power supply to 21 member Massachusetts municipal electric systems, and seven nonmember municipal participants (six in Vermont; one in Rhode Island). MMWEC's services include: power procurement, risk management, purchased power arrangements, and ownership interests in five electric generation facilities - predominantly nuclear-fueled.

CONTRACT OBLIGATIONS
Take-or-pay, court-validated PSAs enhance the credit quality of MMWEC's four remaining nuclear project bonds. Each participant is required to make project payments as an operating expense of its electric utility, before debt service on the utility's own bonds. The project payments are also payable whether the project is operating or not. In addition, the PSAs require a 25% step-up of each participant's original obligation to mitigate the risk of a default by the weakest participants.

Project 6 is alone without the full step-up; 23.2209% was exhausted principally when the Vermont Supreme Court voided the contracts of the six Vermont participants in 1988. To bolster bondholder protection, project 6 maintains a \\$30.5 million debt service reserve fund that, together with the residual step-up, mitigates the risk of participant default to a satisfactory level.

The solid credit quality of Westfield Gas & Electric and Braintree Electric Light Department moderates their direct bondholder exposure in nuclear projects 3 and 5, respectively.

STRONG PARTICIPANT FINANCIALS

MMWEC's participants exhibit sound financial metrics and economic indicators in support of the project ratings. Moreover, the extensive overlap of MMWEC's project participants is a consideration in Fitch's 'A+' rating for all of the project bonds.

Collectively, the participants have modest electric system debt, which results in high ratios of equity to capitalization averaging over 80%. Debt service coverage ratios average over 6x and adjusted coverage of 1.47x is slightly above the Fitch 'A+' retail median (1.37x for fiscal 2014). Aggregate cash on hand averages a healthy 227 days and includes certain MMWEC-member cash advances held in a trust reserve at the agency level. Those funds are used by the member towns to help offset retail rate increases.

As is typical of a project-based joint action agency, MMWEC maintains debt service coverage of only slightly over 1x for each of its separately secured projects, choosing instead to leave project equity at the participant level.

COMPETITIVELY PRICED POWER SUPPORTED BY LOW DEBT

MMWEC's very limited financing needs should enable it to continue providing competitively priced power to its project participants. All non-nuclear project debt has been repaid and the nuclear project debt will fully mature by 2019, despite operating licenses that extend to 2045 and 2030 for Millstone No. 3 and Seabrook Unit 1, respectively. An extension of the Seabrook license to 2050 is currently pending.

Additionally, MMWEC maintains project reserves that will be sufficient to substantially cover remaining nuclear project debt service following the July 1, 2016 debt payments. This provides an added financial cushion as this nuclear project debt amortizes rapidly through final maturity in 2019. MMWEC's consolidated debt-to-FADS is as expected very favorable at 2.4x, relative to the peer rating category median of 9.9x for 2014.

Participant retail rates remain competitive compared to other utilities in the state and are about 85% of the regional average. Rate competitiveness should improve further following the repayment of the nuclear project debt.

SATISFACTORY OPERATING PERFORMANCE
Operating statistics for both nuclear facilities continue to meet industry standards. However, in 2015, the NRC initiated increased oversight at the Millstone nuclear power station due to a security concern found in a November 2014 inspection. The NRC classified the finding as a low-significance concern. MMWEC also has its own comprehensive oversight program to monitor plant performance and ensure compliance with NRC requirements at both nuclear generation units.

Capacity factors for Millstone No. 3 and Seabrook Unit 1 were 88.2% and 93.2%, respectively, in 2014. A scheduled refueling outage caused the lower capacity factor for Millstone No. 3.

The nuclear decommissioning funds for both projects are adequately funded as of the end of Dec. 31, 2014. MMWEC's share of the capital expenditures at each of the nuclear projects will be funded from available capital reserves for fiscal 2015 and 2016, which Fitch views as positive.