CEO’s Report: Planning pays offApril 6, 2021
Stick to the plan.
When things aren’t going as we’d like or tough decisions must be made, it’s tempting to veer off course in search of an easier path.
But it’s important to stick to the plan and keep the big picture in mind.
It certainly wasn’t easy for those of us at Heartland to make some tough decisions to get us where we are today.
It wasn’t easy for our customers either.
But, because we stuck to the plan, today our financial profile is strong.
Fitch affirms rating
Fitch Ratings recently affirmed the credit rating of Heartland at A- with a stable outlook.
The rating reflects the strong wholesale take-and-pay power sales contracts, our independent ability to adjust rates as necessary and low operating cost environment.
While Fitch notes Heartland’s financial profile has been variable in the past, it now remains healthy, largely due to the realignment of our generating portfolio to better match demand.
Fitch noted the coronavirus outbreak only minimally affected Heartland’s 2020 finances. Sales were down slightly from budget for the year, but weather was the biggest driver of demand.
The Fitch report also noted Heartland was not negatively impacted by the recent severe winter weather.
While many utilities are experiencing sharp spikes in costs, Heartland customers will not see rate increases because of the event.
Market participation reduces risks in and of itself. Market prices fluctuate and during the February polar vortex, prices escalated as demand surged. Utilities that depend largely on the market for power were subject to increased prices. Heartland, on the other hand, also sells generation into the market, helping us hold a balanced position. Our diverse resource mix helps protect customers against market swings.
Customers play role
Heartland customers also play a role in our credit rating. Fitch considers customer rate competitiveness, ability to absorb rate increases as well as financial performance.
Overall, Fitch noted Heartland’s overall service territory is very stable, spanning states each with unemployment rates near or below national levels. Heartland’s share of sales to the market has declined in recent years, largely due to our divestiture of Laramie River Station, which also had a positive impact on our rating.
Planning pays off
It’s no secret customers endured some tough years to get where we are today. Rate increases were necessary to improve Heartland’s financials and our credit rating. While not ideal, sticking to the plan led us to today.
Moody’s also recently rated Heartland at A2 with a stable outlook.
A strong credit rating is important for a variety of reasons. Ratings influence borrowing costs, which are in turn passed down to customers. Some industry vendors have minimum rating requirements for doing business. Potential customers also review ratings.
We’ve talked a lot the past several years about the benefits of divesting of LRS and making tough decisions to secure a strong future.
While the talking points may get old, every time we get news such as the Fitch rating, I am assured we made the right, although sometimes tough, decisions.
We stuck to the plan and we are all the better for it.