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Moffat County, Colorado Tri-State Generation and Transmission Association Inc.; CP; Rural Electric Coop <br />Outlook <br />The stable outlook reflects our view that the debt reamortization is producing annual debt service savings that support <br />Tri -State's forecasts of sound coverage, benefit bondholder protection, and create capacity to apply operating cash <br />flow to capital needs. In addition, progress in resolving customer discord issues should facilitate strategic planning and <br />provide financial flexibility. <br />Upside scenario <br />We do not expect to raise the rating within our two-year outlook horizon because the utility's debt reamortization shifts <br />principal payments to later years. Also, we view Tri -State's revenue stream as exposed to the volatile oil and gas <br />sectors. Furthermore, the cooperative, lilce many other utilities that depend heavily on coal for generation, needs to <br />develop a strategy for responding to emissions regulations and competitiveness issues. <br />Downside scenario <br />We could lower the ratings if Tri-State does not achieve sound coverage in line with its projections whether due to <br />member discord, a lack of ratemaking flexibility, higher-than-expected costs attributable to the capital plan or <br />complying with environmental regulations. We could also lower the ratings if the utility does not maintain liquidity <br />sufficient to meet the 2009 bonds' liquidity requirements. <br />Springerville Generating Station Unit 3 Debt <br />In 2003, Tri-State financed the construction and acquisition of the Springerville Generating Station Unit 3 by creating a <br />lease structure with Springerville Unit 3 Holding LLC, as the owner -lessor. The lessor issued notes to fund <br />construction. In turn, a pass-through trust purchased the notes with the proceeds of the Tri-State 2003 series A and B <br />pass-through trust certificates that the utility sold to investors. Although the cooperative's obligation to make lease <br />payments is a general unsecured obligation of the utility, Unit 3 and its related assets at the plant site secure the <br />certificates. As of June 30, 2017, $419 million of certificates were outstanding. Their maturities extend through 2033. <br />The lessor owns the power plant, and it leases the underlying land from Tucson Electric Power, Co. and has sublet it to <br />Tri-State. The power plant lease is a triple net lease that is absolute, unconditional and not subject to abatement. The <br />three-month outage to repair turbine damage in 2012 highlights the significance of these lease provisions. <br />Based on its 51% equity interest in the Springerville Unit 3 Partnership L.P., Tri-State frilly consolidates the project's <br />assets, liabilities, and expenses in its consolidated financial statements, and its income statement does not include <br />lease expense. <br />Tri-State Generation & Transmission Assn <br />Long Term Rating A/Stable Affirmed <br />Tri-State Generation & Transmission Assn cp <br />Short Term Rating A-1 Affirmed <br />WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 11, 2017 S <br />1! 111: 0 -:-!1 <br />