Fitch Affirms Bond Ratings for CMEEC, Connecticut Transmission Municipal Electric Energy Cooperative

by Paul Ciampoli
APPA News Director
May 6, 2023

Fitch Ratings recently affirmed bond ratings for Connecticut Municipal Electric Energy Cooperative and Connecticut Transmission Municipal Electric Energy Cooperative at ‘AA-‘. The Rating Outlook is Stable.

Specifically, the rating agency affirmed the following ratings for Connecticut Municipal Electric Energy Cooperative: $11.4 million 2021 series A, transmission services revenue bonds; $19.3 million 2022 series A, power supply system revenue bonds; and Issuer Default Rating. Fitch also affirmed the AA- rating for Connecticut Transmission Municipal Electric Energy Cooperative’s $16.3 million 2021 series A, transmission system revenue bonds.

The Connecticut Transmission Municipal Electric Energy Cooperative was created by CMEEC in 2009. As a separate joint action agency, it acquired local transmission assets in order to provide transmission services required by CMEEC for its members and customers. It is governed by the same body as CMEEC. The management and staff of CMEEC operate Connecticut Transmission Municipal Electric Energy Cooperative and oversee its operations.

The ‘AA-‘ long-term bond ratings and IDR for CMEEC and Connecticut Transmission Municipal Electric Energy Cooperative “reflect very strong revenue defensibility, which is based on the long-term, all-requirements contracts and strong member credit quality that supports CMEEC’s consolidated revenue base, as well as CMEEC’s strong consolidated operating risk profile, and historically very low financial leverage,” Fitch said.

While operating income declined in fiscal 2022, resulting in an increase in leverage ratio for the year, Fitch noted that the weaker results stemmed from several non-recurring items including a restatement of the debt amortization associated with the refunded 2013 power supply bonds, a transmission revenue-true up credit for the year, and legal fees.

“Going forward, Fitch expects operating income and overall financial performance to return to pre-2022 levels, which should stabilize the leverage ratio at roughly 6.0x, a level supportive of the current rating.”

Operating costs are low, “although energy supply is concentrated in near-to-medium term market power purchases, subjecting CMEEC to variability in market pricing. In 2022, higher fuel costs and market energy prices led to a higher cost burden, but CMEEC’s comprehensive hedging policy helps mitigate this risk, and costs have decreased in 2023,” Fitch said.

Capital plans are limited to minor maintenance with no new debt requirements projected through 2027.