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BPA's Use of Loan Money could Downgrade Credit

by Business Digest Staff
Seattle Times, March 21, 2003

SEATTLE -- The cash-strapped Bonneville Power Administration (BPA) is facing a potential credit downgrade as its finances continue to deteriorate.

The agency, which is responsible for marketing federal hydroelectric power generated in the Northwest, is facing a shortfall of operating funds this year and is considering using money from its long-term loans to meet operating expenses, rating agency Standard & Poor's warned yesterday.

BPA refinanced debt in 2000, freeing up cash to prepay federal loans. Last year it paid an extra $266 million on federal debt, rather than on operations, which increased the need for additional rate increases.

This year, BPA will have about $315 million to prepay federal debt. BPA customers, mostly utilities and big companies, say it should use the money for operating expenses, so BPA won't have to raise rates. But S&P says doing so would prompt a downgrade of BPA's current AA-minus.

"A utility choosing to long-term-debt finance its operations is not a AA credit," said analyst Kathryn Mock Masterson.

BPA's cash reserves have fallen to about $188 million from $811 million at the end of 2000, Masterson said. It also has access to a $250 million federal line of credit, she said.

BPA's Use of Loan Money could Downgrade Credit
Seattle Times, March 21, 2003

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