March 3, 2020, OVERTON, Nevada – Fitch Ratings has upgraded Overton Power District #5 (OPD5), a not-for-profit power provider in the northeastern part of Clark County, from an A- to an A rating, recognizing what OPD5 executives said is its increasingly strong and stable financial performance.
Fitch Ratings, the New York-based national bond credit rating company, announced Feb. 10 that it has upgraded the “Issuer Default Rating” for OPD5 from an A- to an A rating.
OPD5 provides electric power to more than 16,000 customers in a largely rural service area covering more than 1,932 square miles of northeastern Clark County, including the communities of Mesquite, Overton, Logandale, Bunkerville and other parts of the Moapa and Virgin Valleys.
According to a summary report released by Fitch Ratings, “The upgrade to ‘A’ from ‘A-’ reflects the continued improvement in OPD5’s financial profile, which is supported by very low operating cost burden, improved margins, and liquidity, and financial leverage that declined to 4.2x in fiscal 2018.”
The report noted that OPD5 hasn’t raised its power rates since 2012. In fact, Fitch pointed out that in 2019 “the district reduced rates to begin passing through the lower cost of energy to ratepayers.”
“Rate flexibility is strong, and the district maintains the legal independent ability to adjust rates as necessary. Currently, the rates are adequately affordable and competitive. A cost of rate study completed in 2018 supported the moderate reduction in rates in 2019. Changes resulted in an overall reduction despite increases in fixed charges and some other portions of customer lines,” the Fitch Ratings report added.
During OPD5’s Feb. 19 board meeting, Mendis Cooper, general manager, briefed OPD5 board members on how he and his staff worked with Fitch analysts for months to provide detailed financial and related information, calling it a “long and extensive process.”
The Fitch Ratings report cited about $39.9 million of secured debt, which is privately held by the National Rural Utilities Cooperative Finance Corporation. Fitch also noted that capital spending at OPD5 is likely to increase within the next few years in order to heighten system reliability and transmission capacity and added that OPD5’s capital plans between 2019 and 2024 total an estimated $29 million.
“In recent years, capital projects were entirely funded from operating cash flow,” the report said. “Going forward, management expects cash flow and some level of reserve drawdown to fund capital until roughly 2023 or 2024 when the district will look at debt funding. The district has built up reserves for this expectation.”