Fitch Ratings has conducted its first re-evaluation on the Central Arizona Water Conservation District’s (CAWCD’s) Series Water Delivery and Operation and Maintenance Revenue Bonds.
The review affirms the ‘AA’ rating and stable rating outlook established when this $45.5 million bond was issued in 2016 to finance CAP’s share of the PV-Morgan, Hassayampa Tap and ED2-Saguaro transmission lines.
Fitch's announcement comes after consultation with CAP’s finance and operations staff in late 2017 and reviews of relevant documentation, including the recently released Arizona Auditor General's Special Audit.
“This is a very high investment grade rating. The underlying reasons for that rating – financial health, good rate-setting process, consistent operations – will be a positive factor in obtaining more favorable financing rates in future bond issues,” says Ted Cooke, CAP general manager. “This will save money for CAP and its customers and also provide greater flexibility for financing CAP capital projects.”
Key rating drivers included CAP’s status as:
- Large regional wholesale supplier – distributing approximately 1.5 million acre-feet of water, providing an essential surface water supply and water sales that exhibit a high degree of consistency from year to year
- Contract strength and customer diversity – 59 long-term contracts to a service area of 5.3 million people (80 percent of the state’s population) and pledged revenues for deliveries to 11 Indian communities, which are paid by the federal government
- Healthy overall financial performance – consolidated financial performance is healthy with stable water delivery revenues, robust reserves and healthy debt service coverage
- Limited revenue pledge – bondholders have a limited pledge on general fund revenues which includes O&M charges and a bond replacement charge, which is designed to provide generally sufficient coverage
- Manageable debt position – consolidated debt-to-plant is high at 91 percent, as is typical for a wholesale entity, but debt per capita is low at $242, reflecting the large service area
According to the Fitch Ratings press release, “overall financial performance of the district’s general fund is healthy and the district (CAWCD) has very strong liquidity levels.”