(The following statement was released by the rating agency)NEW YORK, March 26 (Fitch) Fitch Ratings has affirmed the 'AA' rating on the following city of Concord, NC revenue bonds:--$83,425,000 Utilities Systems Revenue Bonds, Series 2008, 2009, 2009B, & 2012. The Rating Outlook is Stable.SECURITYThe bonds are secured by net revenues of the city's electric, water, and wastewater utilities.KEY RATING DRIVERSCombined Utility System: Concord's electric, water, and wastewater utilities generate nearly two-thirds of combined operating revenues from residential and commercial electric sales. The electric utility purchases the large majority of its power from Duke Energy Carolina, LLC pursuant to an all-requirements, take-and-pay contract currently expiring on Dec. 31, 2018.Healthy, Stable Financial Metrics: The combined utility has bolstered its financial position through timely rate increases in recent years. Healthy, stable cash flow metrics, including an average of 2.4x debt service coverage over the past three years, are in line with Fitch's 'AA' retail medians; balance sheet metrics are stronger than the medians.Electric Rate-Making Flexibility: Concord has demonstrated its revenue-raising flexibility, in part, by adjusting retail electric rates commensurate with substantial wholesale rate increases since 2009. Electric rates have stabilized and remain in line with state averages, given the interrelationship with the sizable Duke.Stabilized Water, Wastewater Rates: Water and wastewater rates have likewise stabilized and are coming more in line with averages, after conservation efforts and legacy increases to offset the loss of a large industrial customer pushed the rates higher in 2009 and 2010.Manageable Capital Needs: Manageable capital needs and minimal debt-financing plans should continue to benefit the combined utility's overall financial position. No major capital expenditures are planned, with the exception of some water supply projects that Concord expects to fund from the utility's ample cash reserves.Sound Service Territory: Its proximity to Charlotte (20 miles) and access to major interstate highways buttress Concord's service territory strength and stability. Customer growth has been steady and fiscal 2013 allowance for doubtful accounts was a negligible 0.15% of operating revenues.RATING SENSITIVITIESChange in Strategy: Bondholders should continue to benefit from a diversity of utility revenues generating strong cash flows. While not currently envisioned, a longer-term shift in management strategy to produce slimmer operating margins by instead drawing down robust balance sheet resources could ultimately pressure the rating.CREDIT PROFILEROBUST FINANCIAL METRICSConcord's financial metrics have been strong and stable over the past few years. Sizable rate increases across all three utilities beginning in 2009, including the implementation of a purchase power adjustment, bolstered combined financial metrics and established better balance between the utilities. Rates have since stabilized and come more in line with state averages, thereby restoring some of Concord's revenue-raising flexibility.Cash flow metrics are in line with Fitch's 'AA' rating category medians. Debt service coverage and coverage of full obligations have averaged 2.4x and 1.6x annually over the past three years, including 2.2x and 1.5x in fiscal 2013. Balance sheet metrics are much stronger than rating category medians after several consecutive years of gains. This suggests ample capacity to fund future capital projects without incurring additional debt; the city's intention and an indication of its strong financial planning. Cash on hand doubled in five years to 376 days in fiscal 2013 and the ratio of equity to capitalization improved to 72.4%. The medians are 210 days and 52%, respectively. Concord expects to draw about $15 million of existing balance sheet resources to fund a scaled down capital plan totaling $33 million through fiscal 2018. Pro forma cash on hand using fiscal 2013 operating expenses remains over 300 days and possible rate increases in fiscal 2015 and 2016 could offset a portion of planned draws. Equity ratios should continue to benefit from very limited or no debt financing plans.ONGOING RESOURCE DEVELOPMENT Concord is currently expanding its water supply by 1.2mgd with a new line to Albemarle, NC. The city reports that its water supply is adequate through at least 2035. Moreover, sufficient treatment capacity at its water and wastewater plants (approximately 60% and 45%, respectively) helps limit the scope of major capital projects. The utility purchases the large majority of its power from Duke pursuant to an all-requirements, take-and-pay contract. The contract, which currently expires on Dec. 31, 2018, has consecutive 10-year renewal provisions. Concord is currently evaluating all renewal options. Duke dispatches the city's diesel generators (28MW total) for peaking shaving purposes. HEALTHY SERVICE TERRITORYConcord's healthy service territory, which is located approximately 20 miles north of Charlotte in Cabarrus County, contributes to strong collection rates, despite rate increases in recent years. Electric, water, and wastewater customer growth has averaged 1.4% annually since 2009 to 95,844. Moreover, above-average median household income levels total 113% of the state average and low unemployment rates were 4.2% in Dec. 2013. Allowance for doubtful accounts registered just 0.15% of fiscal 2013 operating revenues.Contact:Primary AnalystRyan A. GreeneDirector+1-212-908-0593Fitch Ratings, Inc.One State Street PlazaNew York, NY 10004Secondary AnalystKathy MastersonSenior Director+1-512-215-3730Committee ChairpersonDennis PidhernyManaging Director+1-212-908-0738Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com.Additional information is available at '
  www.fitchratings.com'.
  This rating action was informed by the sources of information identified in Fitch's U.S. Public Power Rating Criteria.Applicable Criteria and Related Research:--'U.S. Public Power Rating Criteria' (March 18, 2014).--'U.S. Public Power Peer Study Addendum - February 2014' (Feb. 7, 2014);--'U.S. Public Power Peer Study -- June 2013' (June 13, 2013);--'Concord Utility Funds, North Carolina' (April 17, 2012).Applicable Criteria and Related Research: U.S. Public Power Rating Criteria
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=740841
 U.S. Public Power Peer Study Addendum -- February 2014
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735601
 U.S. Public Power Peer Study -- June 2013
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=710397
 Concord Utility Fund, North Carolina (Revenue Bonds)
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676356
 Additional Disclosure Solicitation Status 
  http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=825164
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