Fitch Rates Arkansas Electric Cooperative's Notes, Bonds

Fitch Ratings has assigned Arkansas Electric Cooperative Corp.'s commercial paper notes an 'F1' rating - a relatively low to moderate credit risk.

In addition, Fitch affirms AECC's $326 million in outstanding tax-exempt, secured pollution control revenue bonds (issued by Jefferson County and the City of Siloam Springs) at 'A+'. The rating outlook is stable.

AECC is a not-for-profit electric generation and transmission cooperative providing wholesale electricity to its 17-member rural electric distribution cooperatives in Arkansas. The members provide retail electric service to approximately 485,000 customers.

AECC's new commercial paper program was established to provide liquidity for general working capital purposes. The program is authorized to issue up to a maximum of $210.5 million. The notes are payable from a pledge of revenue subordinate to AECC's payment of operating expenses and outstanding secured debt obligations.

The commercial paper rating also takes into account liquidity support being provided by a $210.5 million unsecured revolving credit facility with a syndicate of banks (short-term ratings of 'F1' to 'F1+') led by National Rural Utilities Cooperative Finance Corp. Of the total liquidity support, CFC is providing the largest share at $85.5 million, with the remaining $125 million being provided by four lending institutions: CoBank, Regions Bank, US Bank and PNC Financial Services.

The credit ratings for AECC reflect the wholesale power provider's power sales contracts with its 17-member distribution electric cooperatives, historically constructive relationship with the Arkansas Public Service Commission, diversified mix of generating resources and reasonable electric rates.

While Fitch expects AECC to maintain adequate financial performance for the rating category, with equity to total capitalization projected at more than 40 percent in the near term, any further deterioration in financial ratios would be a key credit concern.