The Atmos Energy Kansas Securitization I is preparing to issue $95 million in utility tariff bonds to investors, to recoup high costs associated with Winter Storm Uri in February 2021.
A utility tariff property, which includes the irrevocable right to impose, bill and collect securitized utility tariff charges from natural gas customers in Atmos' service area in Kansas, will provide security for the bonds, according to a pre-sale report from Fitch Ratings. The tariff is based on a winter-event securitized cost recovery rider, or WESCR, which itself was approved by a financing order in November 2022.
The trust will issue only one tranche of notes to investors, which Fitch intends to rate 'AAA', according to the rating agency, based in part on expectations of the WESCR payments from all of Atmos Energy's current and future natural gas customers.
Moody's Investors Service also expects to assign ratings to the notes, and points out that the deal has a true-up adjustment mechanism, which helps give credit support to the deal. The true-up mechanism is uncapped and will mandatorily adjust the charges at least semi-annually to ensure that the trust has adequate funds to make timely principal and interest on the bonds. The financing order also authorizes more frequent interim adjustments whenever the servicer determines that doing so is necessary.
That servicer is Atmos Energy, which Moody's says is stable and rates 'A1', but Fitch does not rate.
"The likelihood of a discount in servicing of the securitization property backing the SUTBs is remote," Moody's said. The rating agency added that Atmos Energy is the largest natural gas-only distributor with more than three million customers in more than a thousand communities across eight states.
For its part Moody's will also rate the notes 'Aaa', which have a legal final maturity of March 2035.
