Chattanooga's EPB wins acclaim for fiber-optics

Chattanooga's EPB wins acclaim for fiber-optics

October 20th, 2012 by Ellis Smith in Business Around the Region

EPB put its fiber-optics technology on display this week, winning acclaim from music aficionados and credit ratings agencies alike.

The city-owned utility announced Friday a ratings upgrade on the heels of a transcontinental duet that took place simultaneously in Chattanooga and Los Angeles, which EPB says was made possible by its gigabit fiber.

T-Bone Burnett, who played guitar with Bob Dylan and produced the "O Brother, Where Art Thou?" soundtrack, performed simultaneously with Chuck Mead, founder of BR549.

Burnett played in a Los Angeles studio, while Mead performed at Chattanooga's Coolidge Park in front of an audience of 4,000, who watched on a big screen last Saturday night.

On Friday, EPB announced that credit rating agency Standard & Poor's has upgraded the electric system's debt rating to AA+, based on the strength of the very same fiber-optic system that allows performers to play live music together from different cities.

In their analysis, S&P officials found that Chattanooga's fiber-optic system "is now covering all costs from telephone, video and Internet revenue, as well as providing significant financial benefit to the electric system."

The utility still owes about $287.5 million, but S&P noted that EPB's streamlined, automated operations and solid financial performance contribute to a stable outlook.

"At the same time, the system is providing reliable information to the electric utility on outages, losses and usage, which helps reduce the electric system's costs," S&P wrote in its report.

In contrast, Fitch Ratings cut EPB's bond rating earlier this year from AA+ to AA, saying the utility's growing fiber-optic network was riskier and less predictable than its electricity business.

However, since then, a couple of significant changes have occurred, said Greg Eaves, chief financial officer for EPB.

"The electric system has been paid back its entire loan due from fiber optics, and we continue to grow market share and profitability in the fiber-optics business -- which ultimately benefits the electric system customers," he said.

Today, S&P said that the utility's financial position is aided by Chattanooga's role as a "regional economic center," and EPB's ability to raise rates for its 168,400 customers without the regulatory oversight required for most investor-owned utilities, according to the report.

"The system's financial performance has consistently been solid, in our view, providing ample capacity to incur the additional debt issued to fund the interactive fiber optic system," officials wrote.