Demonstrating tangible evidence of its turnaround in recent years, East Kentucky Power Cooperative announced Friday it has established credit ratings with Standard & Poor's and Fitch.
Both ratings agencies have graded the cooperative as BBB, which is near the low end of investment-grade ratings, with BBB- being less. Rankings below that level are non-investment grade and often referred to as junk bonds.
"EKPC's board and management are committed to strengthening our cooperative's financial condition and, in the past year, we've made significant progress," CEO Tony Campbell said in a statement. "While the two investment-grade ratings affirm that progress, we have much to do to accomplish our strategic objectives."
It's the first credit ratings established in the history of the Winchester-based cooperative, which produces electricity for 16 member co-ops that serve 520,000 homes, farms and businesses in 87 counties.
The rating is a far cry from a few years ago, when the cooperative was being grilled by state officials about its financial condition. In September 2007, during a hearing on a proposed rate increase, the cooperative's chief financial officer at the time said he expected the co-op would have a non-investment grade credit rating if it had applied for one to help with financial construction projects.
The co-op lost money in 2004 and 2005 and had a small profit in 2006. It has since applied for and received approval for multiple rate increases to firm up its financial position.
"An investment-grade rating on EKPC's debt means the cooperative will have better access to financing in the private market, generally at a lower cost than would be possible without a rating," chief financial officer Mike McNalley said in a statement. "And that is critically important in this capital-intensive industry."
East Kentucky Power previously relied on federal government financing through the Rural Utilities Service, which is part of the U.S. Department of Agriculture. But that source of funding has become far more restricted as legislators have taken aim at coal and energy projects linked to it.