MARK SCHUMANN

In its latest report on the Florida Municipal Power Agency’s St. Lucie Project, Moody’s Investor Service addressed the proposed sale of Vero Electric. While maintaining an A2 rating on the FMPA’s bonds, Moody’s April 11 report underscored the rating agency’s assumption that any sale of Vero Electric “would include full enforcement of the existing contracts that govern the project, including full protection for the St. Lucie Project bondholder rights.”

Though some pro-sale advocates have argued the FMPA can and should be willing to make concessions to its contracts to facilitate the sale, Moody’s report underscores the fact that the FMPA is under scrutiny from rating agencies and bond trustees, all of whom are looking to the agency to uphold contracts that protect bondholders.

Moody’s report was complimentary of FMPA debt management.  “Generally speaking, FMPA has established a well-defined risk management plan that focuses on balancing risk exposure and costs across the entire FMPA organization,” the latest Moody’s report reads.

The FMPA’s local detractors see it differently, arguing that the joint action agency is “an institution of inefficiency” that is now over-leveraged. Indian River County Commissioner, Tim Zorc, who has attended FMPA board meetings with Vero Beach City Councilwoman Pilar Turner, is to give a report the the County Commission today on the FMPA.

Excerpt from Mood’s Investor Service report:

DEVELOPMENTS RELATING TO VERO BEACH

The St. Lucie Project’s second largest participant, the City of Vero Beach (15.2%), is considering selling its electric system to Florida Power & Light Co. (FP&L). Although this process has encountered myriad delays, we understand the parties are still negotiating. In the event a sale is completed, Vero Beach would cease to be a participant in the St. Lucie Project. Among the possibilities for how Vero Beach’s entitlement shares might be handled are the following: 1) transfer to another St. Lucie Project participant; 2) transfer to a new participant in the

FMPA St. Lucie Project; or, 3) some combination of the aforementioned options. We understand that FP&L would need to address the Vero Beach power entitlement shares related to the St. Lucie Project as part of any transaction. One possible scenario proposed, subject to FMPA acceptance and other requisite approvals, could involve an assignment and transfer of the existing power sales and project support contracts to Orlando Utilities Commission (OUC; Aa2;stable). The A2 rating for FMPA’s St. Lucie Project revenue bonds incorporates Moody’s belief that the ultimate structure of any sale would include full enforcement of the existing contracts that govern the project, including full protection of the St. Lucie Project bondholder rights. Meanwhile, Vero Beach continues its participation in the St. Lucie Project according to the contract terms as it has to date.