S&P issues negative warning on ratings of TVA debt

The credit rating agency Standard and Poor’s downgraded its outlook to negative on TVA debt today, a week after S&P made a similar warning on U.S. government debt overall.

S&P Credit Analyst Theodore Chapman reaffirmed the top AAA long-term rating for the Tennessee Valley Authority on bonds it issues to finance its power projects. But Chapman said as a wholly owned corporation of the federal government, the negative warning for federal debt may mean that the government is less likely to stand behind TVA debt issues.

"The change reflects our revision of the outlook on the United States of America to negative from stable," Chapman said in a statement released late today.

S&P issued the negative warning on U.S. debt last week due to the rising federal deficit and the likelihood that the federal government will reach its authorized borrowing authority within the next couple of months. Congress is now debating whether to raise the federal borrowing cap.

S&P said TVA’s stand-alone credit profile is 'AA-' and “our view that there is an extremely high likelihood that the U.S. government would provide extraordinary support to TVA in the event of financial distress,” Chapman said.

The negative warning is the first for TVA since S&P gave a similar downgrade caution from 1989 to 1991 related to TVA’s own financial condition.

“The change in outlook on TVA, as a wholly-owned government corporation, is entirely related to the change in outlook for the U.S. government,” TVA spokesman Scott Brooks said. “It does not reflect a change in TVA’s financial strength or any TVA event.”

TVA is completely self-funded and does not rely on financial support from the government, although the federal utility enjoys the implicit backing of the U.S. government.

Brooks said the revised outlook “ is not expected to have a material impact on TVA.”

Details in tomorrow’s Times Free Press