Moody’s Investors Service assigned a first-time Baa2 Issuer Rating to Peninsula Clean Energy (PCE), with a stable outlook

PCE said that it is the second Community Choice Aggregation (CCA) program to obtain an investment-grade credit rating.

"The Baa2 Issuer Rating from Moody’s further validates the CCA model in California," said Jan Pepper, CEO of Peninsula Clean Energy.

In a news release, Moody's stated, "PCE's Baa2 Issuer Rating recognizes the economic strength of the service territory as a not-for-profit California CCA serving more than 285,000 customers throughout all communities in San Mateo County (Aaa stable). The rating considers the inherent strengths of the California CCA model which provides PCE with a captive and arguably sticky customer base capable of delivering reliable revenue and cash flow on a consistent basis. A strength of the California CCA model are the statutory provisions which enabled PCE to immediately become the default provider of generation services for San Mateo County customers of Pacific Gas and Electric Company (PG&E) upon inception. In PCE's case, all twenty of the cities in San Mateo County and the county voted affirmatively to join PCE, a credit positive."

In a news release, Moody's stated, "The Baa2 rating considers the structure's established provisions for timely, full cost recovery through an independent rate setting authority; conservative management strategy centered exclusively around serving the electric needs of its San Mateo customers; actively involved board with a broad business background; ability to secure cost competitive renewable resources; and its demonstrated ability to generate internal free cash flow on a sustained basis; all credit positives. At the end of March 2019 PCE had unrestricted cash of about $108 million, an increase of $42 million from fiscal year end 2018 owing to steady monthly internal cash flow generation. It expects to have around $125 million in cash at June 30, 2019, its fiscal year-end. PCE's ability to generate sustained free cash flow serves to mitigate the CCA's limited three-year operating history."

In a news release, Moody's stated, "PCE's credit profile faces nearer-term challenges, the most significant of which relates to their ability to manage power procurement risk which can be accompanied by uncertainties concerning resource production and load variability. PCE has sought to address these challenges by strengthening its power procurement capabilities, managing its long-term power procurement book by not overcontracting (net short position), executing on a strategy centered around building internal liquidity (expected to reach $125 million at June 30, 2019) and supplementing it with external liquidity through a Barclays Bank line of credit, and focusing its efforts around the needs of its San Mateo County customers which helps to limit the volatility related to managing power procH

Tags:
Peninsula Clean Energy   California   Municipal aggregation   Community choice aggregation   Finance  

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