2.2.06

M.U.D. pleased with its ratings for bond sale
by Nancy Gaarder, Omaha World-Herald

Metropolitan Utilities District has received good news as it prepares to shoulder -- for the first time in more than 30 years -- a substantial amount of debt.

Two of the nation's premier financial rating institutions have given M.U.D.'s water department an above-average ranking, which will allow the utility to pay lower interest rates next week when it issues $100 million in revenue bonds.

The money is needed to finance construction of a $352 million water treatment plant and wellfield.

Standard & Poor's has provided the district with an AAA rating, while Moody's Investor Service has issued a slightly lower Aa3 rating.

Shawn O'Leary, analyst for Moody's, said several factors helped M.U.D. secure the strong rating:

• Independently governed. M.U.D.'s board can raise rates as it sees fit. Some utilities must first get state or local government approval to do so. Furthermore, M.U.D. has demonstrated a willingness to raise rates. Water rates rose 5 percent this year, and more increases are planned through 2011.
• Fiscally conservative. M.U.D. rarely goes into long-term debt and instead pays for capital improvements through current revenues. The district hasn't issued bonds since 1972. Its water department currently is carrying a total of about $600,000 in state loans.
• Customer base. A large, stable base of customers who have nowhere else to go for water.

Ron Bucher, senior vice president at M.U.D., said the Moody's and Standard & Poor's rankings are a positive for M.U.D. and should generate more bidding at the auction.

Kirkpatrick Pettis, a division of D.A. Davidson & Co., will supervise the Feb. 8 Internet auction of the bonds. Likely customers are large investment firms.

Bucher and board member Tom Dowd said some M.U.D. customers have asked why the utility isn't issuing minibonds, which the Omaha Public Power District has sometimes done. These give the average investor the benefit of a utility's tax-free bond status.

Next year, M.U.D. anticipates issuing another $100 million in bonds to institutional investors, Bucher said.

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