Indiana Municipal Power Agency returns to market next week
3 min read
Bloomberg News
The Indiana Municipal Power Agency will issue $268.3 million of power supply system revenue bonds next week to refund several earlier series of bonds and finance new capital projects.
The Series 2025A tax-exempt, fixed-rate bonds will price Jan. 15 in a negotiated sale, according to the
Bond proceeds will refund all or some of the agency’s Series 2010A, Series 2013A and Series 2014A bonds; the total aggregate principal of the refunded bonds is $183 million. About $100 million of the proceeds will finance capital improvements and general maintenance of existing assets as well as costs of issuance.
IMPA has about $1.2 billion in outstanding revenue bonds.
The new bonds are rated A-plus by
Fitch cited IMPA’s role as a wholesale power supplier to 61 member utility systems and the healthy credit quality of its largest members. The rating agency also noted that full recovery of IMPA’s costs is assured by long-term, take-and-pay power supply contracts with all members.
Revenues derived from IMPA’s operations — including payments from the system’s members pursuant to those contracts — secure the bonds. All but one of the contracts are 30-year, rolling agreements that require notice to terminate, with termination occurring 30 years after the notice is given.
Fitch said there’s some uncertainty around more stringent Environmental Protection Agency standards imposed during the Biden administration, which face legal challenges but could result in stranded assets and higher costs for IMPA’s members were they to withstand lawsuits and be maintained by the Trump administration.
“It’s really a moving target at this point. I think it’s expected that there could be a change in the regulations, if not done away with completely,” said Jeffrey Wark, director of U.S. public finance-public power at Fitch.
Wark noted that the IMPA’s plan is to reduce coal emissions over time, adding solar capacity to its generation portfolio. He said there could also be additional generation from natural gas, other renewables or even more capital spending on reducing carbon emissions at the existing coal plants.
“We did include a hypothetical in our analysis, which is — if they move forward with a new gas-fired plant, which is what they’ve been publicly talking about — that they’ll have an increase in their debt and leverage,” said Fitch director Andrew DeStefano. “So we’ve factored that into our forward look and… we’d still be comfortable rating them A-plus.”
Jeffrey Panger, director of U.S. public finance ratings at S&P, said IMPA has an integrated resource plan which includes some money for new generation.
“They are looking to add gas-fired generation and renewables,” he said, adding that as of 2023 IMPA’s power generation was about 17% renewable energy. “They are very coal-dependent right now.”
That shift is consistent with credit-supportive policies, he noted, because in S&P’s view, decarbonization “is not a whether, but a when.”
Utilities that are proactive about power supply and financial planning are addressing decarbonization now because they have to make long-range generation plans, he said.
Based on current plans shared with S&P, the rating agency expects that coal will remain a moderately high share of IMPA’s generation, but will dip below its current level. Some of that is going to hinge on commodity pricing, Panger said.
IMPA’s financial metrics remain very strong: “Those are very strong numbers for a joint action agency, and help to keep the rating in the upper end of the A category,” he said.
Moody’s said its A1 rating “reflects our view that the additional debt will not materially change IMPA’s debt burden and the agency’s financial metrics will continue to be supported by the diverse group of member participants.”
IMPA did not respond to requests for comment by press time.
