LP&L in great shape Fitch says, but questions for the future - KCBD NewsChannel 11 Lubbock

LP&L in great shape Fitch says, but questions for the future

By James Clark - email

LUBBOCK, TX (KCBD) - Financial experts give Lubbock Power & Light a clean bill of health, but there are caveats for the future.  Fitch Ratings on Tuesday upgraded LP&L debt from an A- to an A+.  The better rating covers more than $73 million LP&L recently borrowed as part of its deal to buy out Xcel's Lubbock assets, and more than $5 million of debt left over from revenue bonds sold in 2001. 

Fitch said in a written statement, "The upgrade to 'A+' reflects LP&L's completed acquisition of distribution assets from Southwestern Public Service Company (SPS). The acquisition effectively buys-out LP&L's principal competitor..."

Fitch also cited LP&L's vast improvement in financial strength as compared with 2003 when the city-owned utility was nearly bankrupted. 

The Fitch report does caution that LP&L is affected by a wholesale power contract which is due to expire in 2019. And it raises a question; how will LP&L meet the needs of its customers beyond that point?

LP&L and the municipal utilities of Brownfield, Tulia & Floydada make up an organization called WMTPA which in turn created  High Plains Diversified Energy Corporation.  HPDEC recently agreed to begin the process to purchase two natural-gas power plants in the Odessa area for a combined total of roughly $520 million.  HPDEC, on authority from WTMPA, will sell municipal bonds to raise the money.

Fitch acknowledges LP&L's financial responsibility by saying, "LP&L is the main credit behind WTMPA as it provides ultimate credit support to the authority via a 100% step-up provision."

However, Fitch does not mention the $520 million in its analysis.  Why not?  A spokesperson for Fitch has promised to get back KCBD NewsChannel 11 with an answer.

An LP&L spokesperson sheds light on the situation by saying that the purchase agreements for the power plants have not been finalized and the money has not been borrowed.
Copyright 2011 KCBD NewsChannel 11.  All rights reserved.

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