Published: April 30, 2010
Fitch Rates Municipal Gas Authority of Georgia's $75MM Gas Revs 'A+/F1+'; Outlook Stable
NEW YORK - (BUSINESS WIRE) - Fitch Ratings assigns an 'A+/F1+' rating to the following Municipal Gas
Authority of Georgia's (MGAG) notes:
--$75 million gas revenue bonds (Gas Portfolio III Project), refunding
series 2010I.
The bonds are expected to sell via negotiation on May 10, 2010 and are
secured by a general obligation of MGAG, which includes take-and-pay
all-requirement contracts with its members. The bonds will refinance a
portion of its outstanding indebtedness incurred to finance a portion of
the Portfolio III Project (series G) and pay certain expenses incurred
in connection with the issuance of the bonds.
In addition, Fitch affirms the following ratings:
--$150 million gas revenue bonds (Gas Portfolio III Project), series
2009G and 2009H at 'F1+';
--$135 million gas revenue bonds (Gas Portfolio III Project), series
2003A and 2009F at 'A+'.
The Rating Outlook is Stable.
RATING RATIONALE:
--MGAG's portfolio of prepaid gas agreements and owned reserves has
historically provided members competitively priced natural gas.
--MGAG's membership consists in 77 municipal gas distribution systems,
each of which is bound by strong take-and-pay, all-requirements
contracts expiring in 2035. The obligations of the 63 Georgia members
are backed by the full faith and credit of their respective cities.
--Debt service coverage is boosted by MGAG's billing schedule under
which, members are billed according to monthly index pricing plus the
administrative and debt service costs and then rebated project discounts
at the end of the year after debt service obligation and reserve
requirements have been fulfilled.
--Also reflected in the rating is MGAG's debt strategy with short-term
(one year or less) or variable rate debt comprising 35% of total debt.
While this debt profile currently provides MGAG with low borrowing
costs, the authority is exposed to greater remarketing risks when
compared to other joint action agencies. Fitch notes that MGAG has
liquidity available to mitigate some of this risk, which is factored
into the rating.
--Fitch also considers MGAG's industrial sales concentration (56% of
retail member sales) to be a credit concern.
KEY RATING DRIVERS:
--Fitch will continue to monitor MGAG's management of its gas portfolio
given the changing natural gas and energy markets, and debt profile with
the associated remarketing and interest rate risk.
--While member contracts are strong take-and-pay all requirement
agreements, Fitch will continue to monitor any changes in MGAG's
members' local economies, governance or other factors that might impact
members' ability or willingness to pay.
CREDIT SUMMARY:
MGAG, a natural gas joint-action agency, manages wholesale gas supply
for its 77 members that own and operate gas distribution systems
primarily in Georgia but also in Alabama, Florida, Pennsylvania and
Tennessee. Through its member systems, MGAG serves approximately 250,000
end users. Each member system is contractually obliged to take all of
its gas supply needs from MGAG through strong take-and-pay all
requirements supply contracts expiring in 2035. MGAG also has
intermediate term and limited services contracts with nine different
partners.
Applicable criteria available on Fitch's web site at 'www.fitchratings.com'
include:
--'Revenue-Supported Rating Criteria', (Dec 29, 2009);
--'Public Power Rating Guidelines', (June 11, 2009).
Additional information is available at 'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE.
Fitch Ratings, New York
Drake Richey, +1-212-908-0325
Karl
Pfeil, +1-212-908-0516
Media Relations, New York
Cindy
Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com
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