Fitch Affirms Nebraska Public Power District's Commercial Paper at 'F1+'

Fitch Ratings has affirmed Nebraska Public Power District's (NPPD) $150 million commercial paper (CP) notes, series A, at 'F1+'.

SECURITY

The CP notes are secured by funds pledged under the resolution, including net revenues of the district. The notes are subordinate to the pledge securing NPPD's approximately $1.7 billion of outstanding general revenue bonds.

KEY RATING DRIVERS

ROBUST LIQUIDITY: The 'F1+' rating on the CP program is supported by NPPD's ample internal liquidity sources - including a $150 million revolving credit facility - equal to approximately 4.2x potential liquidity needs, as of April 30, 2015. The district's own cash and cash equivalents provide .92x the maximum size of the CP program.

SOLID LONG-TERM CREDIT CHARACTERISTICS: A stable financial performance, diversifying power supply, and strong service territory underpin the 'A+' long-term rating on NPPD's general revenue bonds.

PRESSURE FROM EXPIRING CONTRACTS: Wholesale contracts with 48 wholesale municipalities, 24 public power districts (PPDs) and one electric cooperative representing nearly half of the district's total revenue base could begin expiring on Dec. 31, 2021, well before the majority of the district's outstanding debt matures. The duration of the contracts exposes NPPD to considerable operating risk that has been well managed to date, but could ultimately pressure the rating in coming years.

RATING SENSITIVITIES

LOSS OF WHOLESALE CUSTOMERS: The district's inability to make measurable near-term progress towards renewing expiring wholesale agreements and stabilizing long-term demand requirements will likely result in negative long-term and short-term rating action. Although potential termination remains over eight years away, the prevailing uncertainty of the district's service requirements is likely to increasingly frustrate long-term planning efforts.

CREDIT PROFILE

NPPD is Nebraska's largest electric utility, providing retail service to about 90,300 customers and all-requirements wholesale power supply to 51 municipalities, 24 PPDs and one electric cooperative pursuant to long-term contracts. The district's considerable service area excludes the state's two largest cities, Omaha and Lincoln, but nonetheless includes a substantial population estimated at 600,000. Steady growth in employment throughout the service territory's predominantly agriculture-centered economy has resulted in exceptionally low unemployment and overall stability among the district's customer base. The state's unemployment rate has remained below 5%, including during the recent economic recession.

AVAILABLE REVOLVING CREDIT FACILITY

The 'F1+' rating on the CP program is supported by NPPD's internal liquidity, which includes a credit agreement with U.S. Bank National Association ($75 million) and State Street Bank and Trust Company ($75 million), as well as additional own cash and investments. The credit facility, which by resolution is sized to the maximum authorized amount of the CP notes, is available to cover principal payments if rollover proceeds are insufficient to pay commercial paper amounts due at maturity. The credit agreement expires July 1, 2017.

For more information on Fitch's long-term rating on NPPD, see Fitch's press release 'Fitch Rates Nebraska Public Power District's 2015 General Revs 'A+'; Outlook Stable,' dated Jan. 16, 2015, available on Fitch's web site at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

This action was informed by information identified in Fitch's Revenue-Supported Rating Criteria and U.S. Public Power Rating Criteria.

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985624

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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