Moody’s Ratings Increases Lubbock Power & Light System Bond Rating
The Moody’s decision to raise the rating is the second this summer after S&P Global Ratings decision to raise Lubbock Power & Light’s rating in June.
Moody’s Ratings raised its electric revenue rating for Lubbock Power & Light (LP&L) from 'A1' to 'Aa3' on the LP&L system revenue debt; issuing a stable outlook. The decision to increase the rating for LP&L follows the successful migration of all customers from the Southwest Power Pool (SPP) to ERCOT and the historic transition to the retail competitive market in ERCOT. This is the second rating agency to upgrade the long-term system rating for LP&L this summer as Standard & Poor’s (S&P Global Ratings) raised LP&L’s rating in June from ‘A’ to ‘A+.’
The decision from Moody’s highlights the fact that customers in LP&L's service territory now have retail choice and can select among multiple retail electric providers for their power supply. Based on LP&L's lower business risk profile, they anticipate its financial performance will be more stable and predictable with likely improved coverage and liquidity metrics in the near term.
“The upgrade to Aa3 from A1 of the city’s electric revenue rating largely reflects the de-risking of LP&L following the successful transition from a generation system to a distribution-only system and entrance to the ERCOT retail market,” Moody’s stated in their release. Moody’s further highlights LP&L management’s expressed plan to rapidly pay down debt and to cash fund a higher percentage of infrastructure projects going forward as a factor in upgrading the utility’s bond rating.
The increased rating will benefit Lubbock ratepayers by lowering the cost of any future borrowing as LP&L continues to invest in the locally owned electric grid and responsibly plan for its expansion. Alongside grid investment, LP&L plans to engage in an aggressive debt reduction plan in the coming years in order to provide reliable service at an affordable cost for ratepayers. With the constantly increasing demand for electricity and electric infrastructure, it is important that LP&L continue to invest in the local grid to stay ahead of growth, and with this decision, the utility do so at a more affordable cost to its customers.
“This is once again great news for LP&L as key institutions are recognizing our historic and successful transition into the retail market as a transmission and distribution service provider,” said Harvey Hall, LP&L’s Chief Financial Officer. “With a second rating agency upgrading our rating, we are excited to take on our new business model and our stated goal is to run Lubbock’s electric grid in a reliable manner while working to be the low cost delivery system in the state.”
LP&L currently holds an ‘A+’ rating with S&P, an ‘A+’ with Fitch Ratings, and an ‘Aa3’ rating with Moody’s Investor Services.