Story last updated at
3:32 a.m.
Friday, December 31, 2004
S&P raises bond rating for LP&L
Service notes improved management of utility
BY CORY CHANDLER
AVALANCHE-JOURNAL
Citing improved management practices, support from the city's general
fund and a growing service area economy, one rating service has improved its
outlook for Lubbock's electric utility bond ratings.
Standard and Poor's Rating Services upgraded Lubbock Power and Light's
revenue bonds rating outlook from negative to stable Wednesday while affirming
LP&L's BBB- rating — given by the service last year.
"I think it's a strong statement when you get your bond ratings agents in New
York to show that kind of confidence," said City Councilman Gary Boren on
Thursday.
S&P noted improved, "although still weak," utility financial health and new
long-term energy supply contracts that reduced operation risks.
"With continued good results during fiscal year '05, I believe there is a
good chance to see the rating begin to improve, in addition to the outlook,"
said Lee Ann Dumbauld, Lubbock's chief financial officer.
Boren said he expects the upgrade also will boost Lubbock's bond ratings.
In September, Lubbock was removed from S&P and Moody's Investor's Service
watch lists, earning a stable rating, while Fitch Ratings gave the city a
negative outlook.
The three agencies all pointed to LP&L's shaky finances as a possible threat
to Lubbock's general fund balance, which has clouded city bond ratings.
Past City Councils weakened LP&L by siphoning millions out of its budget to
pay non-utility city expenses. LP&L was eventually forced to increase its rates
and reduce staffing.
The council has now placed the utility under a governing board intended to
create a buffer between LP&L and the city's budget.
Dumbauld, in September, predicted that ratings for both the city and LP&L
will climb as the two entities bolster their reserves.
"I think they're seeing that what we said was not a lot of salesmanship,"
Boren said.
In November, Fitch maintained LP&L's rating of BBB+ with a negative outlook,
but Moody's, in September, took LP&L off its watch list and affirmed its A3
rating, Dumbauld said.
She said the agency ratings "speak to a consensus that LP&L has rounded the
bend."
S&P credited a growing economy in LP&L's service territory, though it noted
that the utility does not necessarily gain customers from all new economic
growth.
It also pointed to Lubbock's willingness to financially support the utility
and improved management practices that include limiting transfers out of the
electric system and the increased oversight provided by the new utility board.
cory.chandler@lubbockonline.com 766-8722
