Wednesday, May 8, 2013

S&P Reaffirms MLGW Credit Ratings

Electric Division Financial Position is Stable

Standard & Poor’s Rating Services recently reaffirmed its AA+ rating on all of Memphis Light, Gas and Water’s outstanding debt.

S&P’s AA+ rating, its second highest, is assigned to the standard long term and underlying ratings on MLGW’s electric system revenue bond series from 2003, 2008 and 2010. According to S&P, the reaffirmation reflects several strong factors, including the continued benefits of the 2003 prepayment agreement with the Tennessee Valley Authority (TVA).

“The S&P reaffirmation continues a strong track record of solid credit ratings for MLGW,” said President and CEO Jerry R. Collins Jr.

MLGW purchases its entire power supply from TVA, under a long-term, all requirements contract; therefore it has no power supply responsibility.

In order to lock in low-cost base-load power at a discount for a 15-year period, in 2003 MLGW entered into an electric prepay contract with TVA. Under the contract terms, MLGW receives a fixed credit on its monthly TVA bill, providing annual savings to the electric system of about $13 million.

As fiscal year-end 2012, S&P noted, MLGW had paid down 56 percent of the principal from the original 2003 transaction, factoring in refunding bonds issued in 2008 and 2010. All of the $662 million outstanding is fixed-rate, and matures in 2018.

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