Moody’s upgrades Heartland rating in advance of bond issuance

December 3, 2018

Customers’ vigilance influences upgrade


Heartland received a rating upgrade from Moody’s Investor Services from A3 Stable to A2 Stable. The upgrade came just before Heartland issued $35 million in taxable debt for the buyout of a transmission service agreement with Nebraska Public Power District.

The major rationale behind the upgrade was the results of Heartland’s divestiture of the Missouri Basin Power Project, resulting in a right-sizing of Heartland’s generation capacity. It also reflects the A2 weighted average credit quality of Heartland’s customers.

Heartland CEO Russell Olson acknowledged the customers’ role in the upgrade.

“The sound financial metrics of our customers helped bolster Heartland’s profile. Their prudence deserves to be recognized.”

The buyout of the no longer needed NPPD agreement leads to the stabilization of otherwise escalating transmission costs and results in cash flow savings. The debt term will match the 13-year term left on the transmission service agreement. Bonds were sold by Dougherty & Company, LLC the week of November 12th.

Heartland will enter into a termination agreement with NPPD effective January 1, 2019.

The stable outlook reflects Moody’s expectation that Heartland’s financial position will remain relatively stable as it deleverages over the coming years.

“Heartland has been working diligently over the past several years to get our financial metrics where they need to be, including implementing rate increases as needed,” said Heartland CFO Mike Malone. “We stuck with our plan and more importantly, our customers trusted us to see it through. The sale of MBPP ensures a bright and stable future.”

Fitch affirmed its rating of Heartland at A-, Stable, also recognizing the sale of MBPP as a major factor as it right-sized a previously long-resource position and eliminated the need to procure longer-term contracted sales, providing funds to pay down debt and bolstering the balance sheet.

Fitch also acknowledged Heartland’s resource portfolio being diverse in type and fuel mix and no longer dominated by coal-fired resources. They also recognized Heartland’s financial metrics improved as a result of periodic rate increases and newly contracted sales.

Read the full report from Moody’s here and the Fitch report here.