MCE is the first Community Choice Aggregation program to obtain an investment-grade credit rating.

Written By: Stratton Report
June 14, 2018

MCE is the first Community Choice Aggregation (CCA) program to obtain an investment-grade credit rating.

Photo courtesy of MCE Clean Energy

Moody’s Investors Service assigned a first-time Baa2 Issuer Rating to MCE. Moody’s Issuer Rating is an independent assessment of MCE’s financial strength over the long term, and MCE’s outlook is stable. MCE is the first Community Choice Aggregation (CCA) program to obtain an investment-grade credit rating.

The Baa2 Issuer Rating reflects the strength of the California Joint Power Agency (JPA) statute and the MCE JPA agreement, which together underpin MCE’s creation and business model, and fortifies the ongoing stability of its existing customer base.

The rating further recognizes the local Board-regulated rate-setting authority afforded to MCE, its established track record of operations, consistently improving financial performance, and the economic strengths within its growing service area. At year-end FY 2017, MCE had unrestricted cash of $37 million, supplemented by a $25 million committed line of credit that has no conditionality for advances. MCE projects cash on hand to exceed $60 million by FY 2019. MCE’s working capital needs are modest, and MCE is typically able to generate positive cash flow each month.

Several prominent institutional investors in California renewable projects require that energy buyers, such as MCE, have an investment grade credit rating. The benefits of a Baa2 credit rating include:

  • the potential to receive lower energy prices and improved credit terms for future contracts;
  • access to new sources of energy supply;
  • validation of the CCA business model from an internationally-recognized rating agency; and
  • assurance for customers that MCE’s financial strength is sound and that it will continue to be a reliable source of energy and services over the long term.

Moody’s recognized that a key aspect of the value offered by MCE and other California CCAs is the requirement that renewable and carbon-free energy be a major component of customers’ power supply mix. This value is one of the most significant contributing factors to the strength of the long-term business model. During 2017, MCE projects that renewable energy accounted for 62% of its retail sales, and that 89% of energy came from greenhouse gas-free sources.

Read Moody’s full press release here.


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