Moody’s Update Affirms Positive Credit Rating Outlook

Big Rivers Electric Corporation: Update following outlook change to positive
CREDIT OPINION: August 17, 2017
Full Big Rivers Credit Opinion Update
Big Rivers Electric Corporation (Big Rivers, Ba2 positive) has good prospects for achieving stronger financial metrics that is providing positive momentum for the cooperative's credit quality despite its substantial excess generation capacity, which represents a primary credit constraint along with execution risk while management further implements its load loss mitigation strategies. Big Rivers is demonstrating a good track record since 2013 to combat the significant load loss. For example, sizable rate increases approved by the Kentucky Public Service Commission (KPSC) and cost saving initiatives, among other steps are helping to compensate for the load loss and maintain the cooperative’s viable financial performance. The regulatory support should help its funds from operations (FFO) coverage of interest and debt strengthen over the next 12-18 months closer to 4% and 2.0x, respectively, compared to 2.2% and 1.5x, respectively, for FY 2016, and should result in the utility being free cash flow positive for the next three years. Big Rivers maintains ample liquidity with a $130 million bank line which supplements internal cash flow generation.