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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



 

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

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Lubbock Power & Light, a municipally owned entity of the City of Lubbock is separately governed by an Electric Utility Board appointed by the Lubbock City Council. LP&L has approximately two hundred employees working toward generating and distributing electrical service for the citizens of Lubbock, Texas. LP&L distributes over 85,000 monthly utility statements for electric, water, sewer, solid waste and storm water services. LP&L serves over 70% of the electric market in Lubbock, Texas.

Media: Chris Sims (806) 775-2502

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