OREANDA-NEWS. Fitch Ratings has assigned an 'A+' rating to the following Illinois Municipal Electric Agency (IMEA) power supply system revenue refunding bonds:

--Approximately \$585,000,000 series 2015A.

The bonds are expected to price the week of March 30, 2015. Proceeds will be used to advance refund IMEA's series 2006 and 2007A power supply system revenue bonds for savings.

In addition, Fitch affirms the 'A+' rating assigned to IMEA's outstanding \$1.17 billion power supply system revenue bonds.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by the net revenues of the power supply system after payment of operating and maintenance expenses. Net revenues include payments pursuant to long-term take-and-pay all-requirements contracts expiring in 2035 with IMEA's 32 participants. The power sales contracts are viewed as having an implied unlimited step-up provision.

KEY RATING DRIVERS

STABLE JOINT ACTION AGENCY: IMEA supplies wholesale power to its 32 participating members - municipal electric systems who serve cities and villages located throughout the state of Illinois. The participants are obligated to pay IMEA's power supply costs, including debt service, as an operating expense of their respective systems, which is ahead of member's own debt service.

INCREASED OWNERSHIP OF POWER RESOURCES: IMEA's power resources have become more diverse as the agency has successfully executed its strategy to increase owned generation and reduce purchased power. With both units at the Prairie State Energy Campus (PSEC) and the Trimble County Unit #2 (TCU-2) now operating, IMEA has greater control and certainty of power supply and related costs, albeit at a higher initial price and debt burden.

WEAKENED MEMBER CREDIT QUALITY: The financial position of the Naperville, IL electric fund, IMEA's largest member (37% of energy sales), has weakened materially. In particular, the city's decision to delay needed rate increases to cover higher purchased power costs resulted in an operating loss and depletion of cash resources during fiscal 2014. The city council's approval of base rate increases for 2014 and 2015 should help restore the utility to sounder financial footing.

STABLE FINANCIALS AND IMPROVING LEVERAGE: IMEA's financial performance is stable with fiscal 2014 Fitch-calculated debt service coverage (DSC) at 1.19x and days cash on hand of 105 days. Including available line of credit capacity, liquidity improves to 175 days at April 30, 2014. Leverage as measured by debt to funds available for debt service (FADS) improved further to 10.0x during fiscal 2014 from 23.2x in fiscal 2012, reflecting rate increases related to PSEC's commercial operation.

RATING SENSITIVITIES

MEMBER CREDIT QUALITY: Naperville's inability to generate electric revenues in line with costs, restore cash reserves and strengthen debt service coverage metrics will result in downward pressure on IMEA's rating.

COMPROMISED PLANT OPERATIONS: Failure to operate PSEC and/or TCU-2 at a reasonable and healthy level of availability and capacity, to capture the project's increased capital costs, could result in negative rating pressure.