Fitch Affirms Basin Electric Cooperative's Commercial Paper Programs at 'F1'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the 'F1' ratings on Basin Electric power Cooperative's (Basin) two commercial paper (CP) programs:

--$129,925,000 Mercer County, North Dakota Pollution Control Refunding Revenue Notes, 2009 Commercial Paper Series One (Basin Electric Power Cooperative-Antelope Valley Unit 1 and Common Facilities) (tax-exempt);

--$500,000,000 commercial paper notes (taxable).

SECURITY

Basin's tax-exempt and taxable CP notes are general unsecured obligations of the cooperative.

KEY RATING DRIVERS

LONG-TERM RATING AND DIVERSE LIQUIDITY: Basin's 'A+' long-term credit rating (senior secured obligations) and internal liquidity sources support the 'F1' rating on its CP programs.

SOLID LIQUIDITY COVERAGE: Total internal liquidity resources provide sufficient coverage of maximum potential requirements, in excess of Fitch's 125% threshold. The cooperative reported $253 million of cash and cash equivalents at April 30, 2016, and maintains three revolving credit facilities totaling $1.03 billion to support its tax-exempt and taxable CP programs.

SOUND CORE OPERATIONS: Basin's electric operations provide the cooperative with overall financial stability, and its low wholesale rates provide flexibility to generate additional revenues. Basin's for-profit synthetic natural gas (SNG) subsidiary, which is included in consolidated operations, produces more volatile results reflecting market prices for natural gas and other commodity-based products.

RATING SENSITIVITIES

LONG-TERM RATING AND LIQUIDITY: Maintenance of an 'A' category long-term rating, as well as robust cash and cash equivalents and access to sufficient liquidity facilities, should continue to support the 'F1' rating on Basin Electric Power Cooperative's commercial paper program for the foreseeable future.

CREDIT PROFILE

Basin is one of the largest G&T cooperatives in terms of total assets, megawatt-hours (MWh) generated and service area. It provides wholesale electric service, under long-term contracts, to about 138 members, who directly or indirectly serve approximately 2.9 million people throughout a diverse service area that includes nine states in the Midwest and Western U.S. The service areas are largely rural, with several seeing increased growth in energy related industries.

GOOD LIQUIDITY AND LONG-TERM RATING

Basin's sufficient internal liquidity and 'A+' long-term rating support the 'F1' short-term ratings on the cooperative's tax-exempt and taxable CP programs. Liquidity sources include $252.6 million of Basin's own cash and investments (as of April 30, 2016), as well as three revolving credit facilities available to support its CP programs.

A $130 million credit facility provided by National Rural Utilities Cooperative Finance Corporation (rated 'A/F1') expires in November 2018 and is specifically designed to support the tax-exempt program.

A $500 million syndicated credit facility of 10 banks (all rated 'F1' or higher by Fitch) available through November 2019, and a separate 10-bank $400 million credit facility available through 2018 support issuance under the taxable program and provide liquidity for general corporate purposes.

Events of default under the credit facilities include not meeting coverage requirements, minimum equity thresholds and nonpayment by the cooperative's subsidiaries. However, none of the four relevant subsidiaries have outstanding debt in excess of what is defined in the agreements as 'material indebtedness'.

SOLID BALANCE SHEET AND OTHER RESOURCES

Although various bank authorizations and incumbency certificates are in place, the timing provisions in Basin's dealer and credit facility agreements could provide a limited window for fully accessing bank funds in the very unlikely event of a failed rollover. Basin's more than $150 million of balance sheet resources is therefore an important consideration of the rating.

LONG-TERM RATING

For additional information on Basin's 'A+' long-term rating, see Fitch's press release dated May 20, 2015, and available at www.fitchratings.com.

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

Applicable Criteria

Revenue-Supported Rating Criteria (pub. 16 Jun 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

U.S. Public Power Rating Criteria (pub. 18 May 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864007

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004218

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004218

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160509006739/en/

Fitch Ratings
Primary Analyst
Dennis Pidherny, +1-212-908-0738
Managing Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Matthew Reilly, +1-415-732-7572
Director
or
Committee Chairperson
Christopher Hessenthaler, +1-212-908-0773
Senior Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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