Monday afternoon, Moody’s downgraded Paducah Power’s rating from “A3” to “Baa1”, a one notch drop, with a “stable” outlook. That’s a more favorable rating than the “BBB” downgrade given to the utility in December by Fitch Ratings.
Moody’s said the stable outlook reflects their expectation that the steps recently taken by Paducah Power will lead to a better financial picture in coming months and their belief that Prairie State’s improved operating performance can be sustained.
“The Moody’s adjustment is not a surprise, given our financial metrics,” said PPS General Manager Gary Zheng. “However, we’re very encouraged by Moody’s confidence in our recovery plan and their willingness to keep us at an investment grade rating. Of all the possible decisions by Moody’s this was one of the more positive outcomes we could have achieved under our current circumstances.”
Since November Paducah Power has implemented key elements of the utility’s Rate Recovery Plan, including replacing debt service reserve funds with surety bonds and hiring a new portfolio manager to better manage power sales and purchases. The goal is to stabilize PPS’s finances, saving about $4.7 million in the current fiscal year, so customers can get some rate relief in July.
Moody’s said it expects the recovery plan to yield cost savings and strengthen the utility's finances without rate increases, so they gave the “Baa1” rating instead of the lower “Baa2” rating their scorecard indicated in some of their metrics.
“They seemed impressed with the presentations staff made to them in New York in December, and with the recent performance of Prairie State,” said Zheng. “Our conversations with Moody’s have been very positive.”
