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For immediate release
October 31, 2003
For more information, contact
Mike Cunningham, CFO 762-4778

Rate case rulings affect Chugach bonds rating

Fitch Ratings downgraded $330 million of Chugach Electric Association's unsecured bonds Oct. 29. The rating has been downgraded from "A+" to "A", and reflects the more negative position by the Regulatory Commission of Alaska in its oversight of Chugach, and the tighter financial measures Chugach must take as a result of their position. Chugach was also placed on Fitch's Credit Watch with a negative outlook. Fitch expects to resolve the Credit Watch status over the next 6-8 weeks, pending a meeting with Chugach management to review in greater detail the projected impacts of the RCA's 2003 rate orders.

Chugach had previously cautioned that adverse rulings could affect its bonding status, and has filed in State Superior Court to overturn specific RCA rulings that it feels is unfair to the majority of Chugach's retail customers.

Fitch's downgrade follows a similar downgrade by Standard and Poor's in early August from an "A Stable" to "A-minus Negative." The insured ratings on the bonds are unaffected by the downgrade. That rating remains at "AAA."

While Chugach's bonds were downgraded, according to Fitch, Chugach has many credit strengths. Fitch states that historically Chugach has benefited from consistently solid financial performance, competitive electric retail rates, a diversified customer base and a favorable regulatory framework. In addition, long-term, firm natural gas supply contracts have helped support good operating generation assets and, along with two hydroelectric power purchase contracts, have met the needs of a moderately growing service territory. Financial performance had been very stable through 2001.

Chugach has approximately $390 million in bonds outstanding as of Sept. 30, 2003. They are unsecured obligations and are supported by revenues from Chugach's wholesale and retail power sales operations.

Fitch is one of three national rating agencies that have regularly issued credit ratings on Chugach bonds since the company entered the bond market in 1991. Since that time Chugach has maintained an investment grade bond rating and continues to do so even with the downgrade.

A third rating agency, Moody's Investors Service, has rated Chugach "A2" based on Chugach's sustained financial performance. There may be some rating change by Moody's based on these regulatory actions.

Chugach is the largest electric utility in Alaska, providing power for Alaskans throughout the Railbelt through retail, wholesale and economy energy sales.