Three Credit Agencies Affirm CPS Energy’s Bond Ratings


SAN ANTONIO – CPS Energy has recently received strong bond credit ratings from Moody’s, S&P, and Fitch.  Each affirmed CPS Energy’s existing high industry credit ratings, which will support two refunding debt transactions that are planned for next week. Moody’s and S&P have reaffirmed their current ratings of CPS Energy at Aa1 and AA, respectively, both with a Stable Outlook. Fitch has also reaffirmed its current rating of the utility at AA+; however, it has changed its Outlook from Stable to Negative.

The Fitch rating still reflects the strong credit of CPS Energy; however, the change in their outlook is attributed to their concerns for the following:

  • Emergent challenges in receiving required rate increases from the City Council that are necessary to maintain CPS Energy’s historically strong financial position.
  • A heightened risk, driven by the broader economic stress caused by the pandemic, which could also impact the City Council’s willingness to approve, without delay, the full amount of a rate request.
  • A new local petition that is interested in converting CPS Energy’s current governance structure to one that would cause the utility to be more susceptible to political pressures.

“CPS Energy remains focused on helping its customers through these challenging times and is absolutely committed to performing at the highest levels. This is despite this year’s challenges associated with COVID-19 and lower wholesale market sales,” said Paula Gold-Williams, President & CEO of CPS Energy. “We know the credit ratings agencies are watching all significant activities in San Antonio closely. Part of their close focus is because, historically, we have performed extremely well. While we received a Negative Outlook from one agency, every day we are focused on operating efficiently and are working diligently to return the outlook to “Stable,” across the board.”

Credit Rating AgencyRatingOutlook
Moody’sAa1 – Senior LienStable
Aa2 – Junior LienStable
S&PAA – Senior LienStable
AA minus – Junior LienStable
FitchAA+ – Senior & Junior LienNegative

A Negative Outlook is not always followed by a downgrade. CPS Energy faced similar issues in 2010 when it worked to pursue new nuclear generation. CPS Energy was ultimately moved back to a Stable Outlook after reaching a settlement with a counterparty that limited financial exposure and after completing a successful rate case.

It has been six (6) years since CPS Energy has needed a rate increase and it has only needed one (1) in nine years.  Each year, it has considered the need for an increase and has been able to deploy other measures that have kept its financial ratios strong.  This has included the consistent pursuit of:

  • Cost savings,
  • Investments in technologies that increase efficiencies,
  • Managed growth, and
  • Optimization of its extensive generation capacity in the wholesale and retail markets.

Again, due to the implications of the pandemic, recent declines in wholesale sales, and new activities from special interest groups to use political avenues to affect the company’s proven governance structure, it appears CPS Energy may need an increase by the fall of next year.  While CPS Energy’s management team is cautiously optimistic about fiscal year 2022, which ends January 31, 2022, it remains committed to having future rate case discussions with its community and the San Antonio City Council, as the need evolves. While subject to change, current average total bill estimates could increase by 5%-to-8%.

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