Moody's upgrades JEA Electric Enterprise’s $1.6 billion of debt

Moody's Investors Service said Monday it upgraded JEA Electric Enterprise’s $1.6 billion of debt securities.

Moody's raised the senior lien electric system revenue bonds to A1 from A2; subordinate lien electric system revenue bonds to A2 from A3; St. Johns River Power Park System revenue bonds to A1 from A2; and Bulk Power Supply System revenue bonds for Plant Scherer to A1 from A2.

JEA is a municipal utility created by the city of Jacksonville, Florida. Its service territory covers Jacksonville in Duval County and parts of three other counties.

JEA

The Moody's upgrade underscores the sense that stability has been restored at the utility after a period of governance turmoil, privatization plans that fell apart, and a legal fight with a Georgia power supplier.

The rating agency revised its outlook to stable from positive at the new, higher ratings.

Additionally, Moody's upgraded the utility's underlying long-term rating for variable-rate electric system senior lien revenue bonds to A1 from A2 while affirming the short-term VMIG-1 rating on the bonds.

Moody's also upgraded the utility's underlying long-term rating for variable-rate electric system subordinate lien revenue bonds to A2 from A3 and upgraded the short-term rating on the bonds to VMIG-1 from VMIG-2.

The rating actions reflect “JEA's sound financial performance for fiscal years 2019-2021, evidenced by three-year average financial metrics including strong liquidity and fixed obligation charge coverage ratio of 372 days and 2.86 times, respectively, and an adequate adjusted debt ratio averaging 78.9%,” Moody’s said.

JEA is split into three enterprise funds: the Electric Enterprise, the Water and Sewer Enterprise and the District Energy System.

The Electric Enterprise is comprised of the JEA Electric System, the Bulk Power Supply System and St. Johns River Power Park System.

Jacksonville is a major ground transportation and rail hub and has one of the largest ports on the East Coast. Moody’s noted the local economy is diversified among defense, transportation and distribution, financial services, consumer goods, information services, manufacturing and insurance sectors.

Moody’s said JEA’s strong financial metrics are the result of several years of effort to deleverage and since 2012 the utility has reduced its on-balance debt by nearly 55%.

The rating action also considers the governance changes implemented in 2020-2021 by JEA as a key rating driver that addresses the many challenges that were brought about by personnel changes in its Board of Directors and senior leadership.

“Improvements in governance and transparency are contributing to the good progress JEA is making towards reestablishing the trust of key constituents following settlement of litigation with Municipal Electric Authority of Georgia (MEAG) that eliminated the significant credit negative overhang which previously called into question,” Moody’s said.

Moody's raised JEA's ratings in 2020 after the lawsuits were settled.