The Evergy Missouri West Storm Funding I, 2024-A will issue $331.1 million in utility tariff bonds, to recoup the costs incurred from Winter Storm Uri in 2021.
The issuer is a subsidiary of Evergy Missouri West, a wholly owned subsidiary of Evergy, Inc., an integrated electricity company that serves western Missouri, including the Kansas City metropolitan area, according to ratings analysts from Moody's Investors Service. A securitized utility property grants Evergy Missouri West Storm Funding the right to assess a utility tariff charge on its customers' bills related to Uri, according to ratings analysts.
Evergy is slated to close on February 23, and will issue just one class A note, which Moody's will rate Aaa, analysts said. The notes have an expected final maturity date of Dec. 1, 2038, and a legal final maturity date of Dec. 1, 2040.
A securitization law that powers the security utility property, plus an uncapped true-up mechanism designed to maintain cash flow to the securitization notes, are among the deals positive credit characteristics, according to Moody's.
Evergy Missouri West is on the deal as servicer of the securitization, earning a vote of confidence from Moody's due to its financial strength, it said.
Like other securitizations in this category, Evergy faces potential credit challenges. For one, there is the possibility that the securitization order could be challenged, and a potential for insufficient collections. Also, the deal has a relatively high exposure to commercial and industrial customers. Non-residential ratepayers account for 55% of its customers and about 47% of its revenue, the rating agency said.
"Energy consumption by industrial and commercial customers is more volatile compared with residential customers because consumption by industrial operations is more closely tied to the business cycle," Moody's noted. But even the diverse distribution of industries mitigates that risk.
