Clean Power Alliance Finance Committee
September 27, 2023

CPA Credit Rating Update
September 2023
Overview
CPA has established the achievement of an investment-grade (IG) credit rating as an important organizational goal
In December 2022, Staff engaged S&P to perform a confidential Credit Assessment for CPA, which was completed in August 2023
Following the favorable result of the Credit Assessment, Staff engaged S&P to deliver an Issuer Credit Rating (ICR) for CPA in September 2023 On September 27, S&P published CPA’s credit rating report on its website, awarding CPA an “A-” credit rating with a Stable Outlook 2 Rating Report Highlights
S&P’s report cites several of CPA’s strengths that support this IG credit rating:
• Continued improvements to CPA’s bottom line and rising liquidity position • Strong governance, including robust financial and operational forecasting and proactive risk management
• A diverse portfolio of energy suppliers and projects
• Cost-of-Service based ratemaking combined with a historically stable customer base • Low exposure to environmental and non-compliance risks due to CPA’s high levels of renewable and carbon-free energy supply
• No outstanding debt
3 Next Steps
CPA and S&P will issue separate press releases announcing the credit rating
CPA will follow up with a number of suppliers and other stakeholders announcing the rating outcome
CPA staff are developing a framework and strategy to maintain the credit rating once CPA’s Reserve Policy targets have been met, taking into account some of the risk factors identified in the S&P report Staff intend to share this analysis with the Executive and Finance Committees in the coming months
4 Thank You!
Questions?
Background and Benefits
6 What is an investment-grade (IG) credit rating?
o A credit rating is an opinion published by an independent rating agency (S&P, Moody’s, or Fitch) that assesses the likelihood an entity will repay its debts
o Entities with an IG rating are considered the best credit risks and are able to attract financing at the lowest cost and from the greatest number of lenders and investors Receiving an IG credit rating will yield many benefits to CPA o Increases the number and quality of financial institutions willing to finance CPA’s long-term renewable and energy storage projects, thus reducing costs for developers and allowing them to provide CPA with a potentially wider variety of lower-cost projects to choose from o Increases energy supplier participation in CPA’s short-term solicitations for renewable and conventional energy and RA, and potentially expands terms they are willing to offer thus increasing competition and potentially reducing costs
o Potentially reduces or eliminates certain collateral posting obligations, thus freeing up cash o May lower costs associated with CPA’s bank line of credit o Enhances CPA’s reputation as a stable, financially sound leader in the energy industry, leading to greater trust and influence in the state legislative and regulatory arenas S&P Credit Rating Process
7 In December 2022, Staff engaged S&P to perform
a confidential Credit Assessment for CPA o Staff provided financial and operations data to S&P and engaged in credit Q&A with S&P analysts
o In August 2023, S&P’s rating committee determined that CPA was a “medium investment grade” credit,
corresponding to an A-/A/A+ credit rating
In September 2023, Staff engaged S&P to deliver
a confidential Issuer Credit Rating (ICR), providing
CPA with a final credit rating and ratings report
Staff later directed S&P to convert the confidential
ICR to a public
-facing ICR, which was published
on September 27
Total fee of $50,000 for the credit ratings process
Beginning in September 2024, CPA will pay a
$28,500 annual surveillance fee to S&P to
manage and maintain its public-facing ICR