Utility cooperative receives credit rating upgrade
Norwich — Citing management and governance changes and strong financial performance, Fitch Ratings has upgraded the credit rating for the Connecticut Municipal Electric Energy Cooperative.
The upgrade is expected to reduce bond interest rates and save the utility cooperative $9 million over a 20-year period on refinancing of $62.3 million in debt, CMEEC officials said.
Fitch Ratings upgraded the rating for CMEEC and its sister energy transmission cooperative from A+ to AA- for both their outstanding debt and for bonds the CMEEC board voted in April to refinance to save money on interest costs. CMEEC officials said the higher rating also should “have a positive impact” on transmission revenues.
CMEEC is owned by six municipally owned public utilities: Norwich Public Utilities, Groton Utilities, Bozrah Light & Power, Jewett City Department of Public Utilities, South Norwalk Electric and Water and the Third Taxing District of Norwalk.
In its ratings review report, Fitch wrote that the upgrade reflected CMEEC’s continued financial improvement, limited capital expenditures and declining debt. The rating agency also noted that CMEEC appears to have emerged from the controversy that surrounded the cooperative after five high-ranking officials were indicted in November 2018 on public corruption charges stemming from their roles in planning lavish trips to the Kentucky Derby and a West Virginia golf resort.
“Favorably, CMEEC has implemented many changes to its internal controls and addressed management and governance issues, stemming from the federal indictment of former utility officials and board members in 2018,” the Fitch report stated.
The report listed the board of directors' expansion to 18 members, which was required by state law, the hiring of new CEO Dave Meisinger and no further legal or legislative action, alleviating some risk in assigning a bond rating. Fitch also expects CMEEC to remain strong, despite the coronavirus pandemic, although the agency noted some uncertainty.
CMEEC’s revenues declined by about 5% through April due to the mild winter and COVID-19 business shutdowns.
“Favorably, CMEEC has been able to curtail power purchases as its members’ sales have declined, largely offsetting revenue losses,” the Fitch report stated.
CMEEC officials were pleased with the upgrade and said the cooperative’s reforms and strong outlook deserved consideration. CEO Meisinger, hired in December, credited the work and perseverance of the cooperative’s staff for the agency’s improved financial standing.
Meisinger said the rating upgrade will ensure that CMEEC and its member utilities will have “competitive access to financial markets,” which will help keep retail electric rates lower for their municipal customers.
“We were excited about this,” he said. “We thought our financial metrics warranted being at a higher level, even though there is some uncertainty in the market, but they didn’t discount that.”
CMEEC board Chairman Kevin Barber echoed that sentiment. “I see this as another indication that CMEEC has turned a corner with its re-dedication to strong corporate governance and controls, and has also turned a page in its history by moving ahead with new leadership and a renewed sense of purpose and values,” he said in a statement issued Tuesday. “We will continue to remember and learn from our past, but it will not define our future.”
Daniel Bourges, Groton Utilities manager of communications and community outreach, said the rating reflects that CMEEC member utilities are “very solid, well-run businesses,” and Fitch acknowledged that.
“We feel that we run good utilities that provide great services at great rates,” he said, “and that will show through in the end."
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