While the financial impacts of COVID-19 are yet to be determined and in the midst of uncertain and unprecedented times, New Braunfels Utilities recently announced that on April 7, it received confirmation of its ratings from Moody’s and Standard and Poor’s, the top two worldwide credit rating agencies. New Braunfels Utilities’ creditworthiness was determined to have a stable outlook and confirmed the Aa1 rating by Moody’s, and the AA long-term rating by S&P. At the same time, S&P affirmed its AA rating on NBU’s parity obligations and its A-1+ rating on the utility’s commercial paper notes, series 2019A and 2019B.
In early March, NBU enacted a modified version of its emergency response plan, developed in 2016, which enabled management the agility to support the maintenance of a stable outlook. A very strong operational and management assessment, highlighted by robust financial planning and policies, has positioned the NBU to respond to the growth pressures in a credit-supportive manner.
“New Braunfels Utilities’ rates do not include profit,” said Ian Taylor, NBU’s chief executive officer. “Rates are designed to cover the cost of providing service. Once costs are determined, the revenue needed to cover those costs, while achieving a particular bond rating, is what determines rates. Our board of trustees and management team are insightfully driven to look for ways to cut costs and produce non-traditional revenue.
The rating determines NBU’s cost of debt, but more importantly, it is what determines NBU’s creditworthiness in the Electric Reliability Council of Texas energy market. That market is where NBU buys our community’s power, through what S&P calls ‘a robust forward hedging program,’ which constitutes roughly 80% of an average NBU bill.”
Both Moody’s and S&P cited NBU with a very strong market position, with the weighted average revenue per kilowatt-hour at 92% of the state average, very low water rates, and average wastewater rates.
“These strong credit ratings enable NBU to continue its legacy of providing cost efficient services to our customers while improving and building the needed infrastructure to support our growing community,” said Dawn Schriewer, NBU’s chief financial officer. “I am extremely proud that NBU’s credit assessment noted very strong coverage metrics, strong liquidity and reserves, and strong debt and liabilities profile. These ratings are evidence of prudent governance.”