WESTFIELD – A major rating company has affirmed the A+/stable bond rating for the Westfield Gas & Electric Department, meaning that the municipal utility will continue to finance projects with lower interest rates.
WG&E General Manager Dan Howard, reporting last night to the Municipal Light Board, said that Standard and Poor’s bond rating agency evaluated the departments financial policies practices, cash reserves and potential liabilities in October as part of its annual review.
“The review also allowed for a thorough discussion regarding the department’s long-term operational and capital planning process and provided S&P with a better understanding of the organization’s strategic initiatives and overall direction,” Howard said.
The WG&E currently has bonds accounting for $8 million in municipal debt, as well as an additional $4.7 million in bond anticipation notes used to finance the Southwick gas lateral pipeline.
“However, S&P believes debt service levels are strong and that the department has maintained financial flexibility with advantageous rates,” Howard said. “The review indicated that the WG&E’s current financial situation is very good relative to the majority of distribution companies, particularly considering the difficult economic times.”
S&P also noted that the municipal utility benefited from the Massachusetts Municipal Wholesale Electric Company’s refinancing of current and future Seabrook and Millstone project costs.
However, the rating company expressed concern of the municipal utility’s heavy reliance on nuclear generated power, which accounts for 52 percent of its base electrical power supply, exposing the department to nuclear operating risks.
“Westfield participates in MMWEC’s Seabrook and Millstone nuclear projects which creates large fixed commitments to pay portions of the projects’ debt service,” Howard said of the S&P review.
However, in general, S&P acknowledged the department’s ability to service the existing debt and that it was positioned regarding the capacity to cover future capital requirements and associated debt.
“Sound liquidity that consists of unrestricted cash and investments, as well as reserves provide cash on which the utility can draw to meet unforeseen operating expenses,” S&P found in its review, adding that “the WG&E is well positioned to adapt to and address rapidly changing market and regulatory conditions.”
