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.
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