Ahead of late October bond issue… GRDA receives credit rating upgrades

Vinita – As the Grand River Dam Authority continues preparing for a large bond issue later this month, it is getting a boost and some positive reinforcement, from the nation’s credit rating agencies.

A graph showing the Grand River Dam Authority’s trend of improving credit ratings (2005-2016).

A graph showing the Grand River Dam Authority’s trend of improving credit ratings (2005-2016).

Perhaps the biggest news came last. On Friday, October 7, Standard & Poor’s Global Ratings announced that it would raise its long-term rating and underlying rating (SPUR) to ‘AA-‘ from ‘A+’ on GRDA’s earlier bonds. Further, S&P announced it was assigning an “AA-“ rating to the upcoming bond issue, with a stable outlook.

That news came on the heels of a Thursday (October 6) announcement by Fitch that it was assigning an “A+” rating to the Authority’s latest bond issue. Fitch also upgraded GRDA’s 2008 and 2010 series bonds to “A+” from “A.” Earlier in the week, Moody’s also assigned an A1 rating to the upcoming bond issue and reaffirmed its “A1” rating of existing GRDA bonds.

“This is tremendous news from all agencies,” said GRDA Chief Financial Officer Carolyn Dougherty. “This is the kind of affirmation from the credit rating industry that our team has worked so hard to receive. The efforts of our board, management team and workforce are reflected here.”

Dougherty added that strong customer relationships also contribute greatly to this kind of credit rating improvements. “This is what can happen when we are able to work so closely with our customers on long-term planning,” she said. “Our contracts reflect the long-term intent of these relationships and enable us to utilize electric generation resources that are appropriately-sized to meet customer needs.”

The debt profile needed to acquire and operate those resources is also shaped to meet the diversity of the GRDA customer mix, which allows for maximum use of tax-exempt bonds, she added. In the end, the result is a long-term and affordable source of electricity for the customer and an improved financial foundation for GRDA, as recognized by the rating agencies.
In its statement regarding its upgrade, S&P noted several key factors in the Authority’s favor. A diverse power supply, improved cash flow, significantly reduced debt service requirements, prudent risk management policies, good operating performance and ample system capacity to meet the energy demands of its customers through 2031 were just some of the reasons S&P cited for the upgrade.

The agency also noted that “in our view, [GRDA’s] financial profile has strengthened in recent years, and actual results have generally met or exceeded forecasts.”

In a similar statement, Fitch noted that its ratings of GRDA reflected “the recent improvement in GRDA’s financial profile, as well as Fitch’s expectation that the Authority will sustain financial metrics supportive of the ‘A+’ rating category.”

Finally, Moody’s stated that “GRDA’s competitive advantage remains its low generating costs, which allows it to charge an electric rate that consistently ranks among the lowest in Oklahoma.”

GRDA will use the funds from the October 25 bond issue to refinance other outstanding bonds, similar to how a homeowner may refinance a mortgage. That effort, coupled with this recent news from the rating agencies, will result in substantial savings for the Authority’s ratepayers.

“The decision to pursue this bond refinancing was driven by our goal to save our ratepayers money,” said GRDA Chief Executive Officer Dan Sullivan. “We are committed to efficient, reliable and competitive operations and these improved credit ratings illustrate how that commitment also leads to improved financial stability.”

Headquartered in Vinita, GRDA is Oklahoma’s state-owned electric utility; fully funded by revenues from electric and water sales instead of taxes. Each day, GRDA strives to be an “Oklahoma agency of excellence” by focusing on the 5 E’s: electricity, economic development, environmental stewardship, employees and efficiency.