Fitch gives United Power A rating

Plans to leave Tri-State G&T on May 1, but exit fee still uncertain

Fitch Ratings, a leading appraiser of credit worthiness of public institutions, has bestowed United Power an A as the Brighton-based electrical cooperative continues preparations for its exit from Tri-State Generation and Transmission on May 1.

The sturdy credit rating — below superlative AAA or the still strong AA, in Fitch’s rankings — was given despite continued uncertainty about how much United will have to pay Tri-State to leave remaining members of Tri-State whole. That precise amount remains to be determined by the Federal Energy Regulatory Commission in a very messy proceeding that began almost five years ago. United’s managers estimate that the payment will range between $230 million and $552 million.

Fitch said it has factored in a range of scenarios in its rating. Lump sum termination payments in this fiscal year? Long-term financing of the debt to Tri-State and related asset purchases (between $375 million and $627 million)? And rate increases over the next four years?

The statement by Fitch in places has some financial geekiness. To wit: “United Power’s very strong revenue defensibility primarily reflects that cooperative’s competitive position as a monopolistic provider across a rapidly growing and economically thriving service area.”

United’s service territory extends from the foothills west of Arvada and Boulder to some of the oil and gas fields of Weld County. It has many of Colorado’s fast-growing areas and many major industrial uses, too. The cooperative’s top 10 customers, which are predominantly companies in the energy sector, account for approximately 35% of revenues.

“Growing energy sales from retail customers have generally led to revenue growth that exceeds increasing operating expenses and has generated healthy operating margins.”

But Fitch considers United’s liquidity profile to be weaker. It expects United to take on more debt but still not so much as to tarnish the A rating. Could United’s shining new star fade?

United needs to raise rates, says Fitch.

The stars could multiply if United improves liquidity.

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