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In the course of routine surveillance, Fitch Ratings affirms its 'A+' rating on Brunswick, North Carolina's $101.9 million of outstanding enterprise system revenue bonds. The Rating Outlook is Stable.

The 'A+' rating reflects the system's strong debt service coverage, ample liquidity, and solid legal provisions. It also reflects high debt, limited service area, and above-average rates. The county continues to implement a significant capital improvement plan and produce solid financial operations. While customer growth is expected to continue, sound planning should continue to provide ample system capacity.

The system is a regional utility provider, serving the unincorporated areas of the county. The customer base is predominately residential, with wholesale and industrial users accounting for approximately 40% of system usage revenues. Over the past five years, the county has expanded its customer base through a combination of system acquisitions and population growth, transforming it into a sizable regional system. Although growth has slowed over the past two years, the county anticipates approximately 4,000 additional sewer customers as a result of the recent acquisitions of the Sunset Beach and Calabash areas. The system currently serves approximately 30,000 water customers and 8,500 sewer customers. Rates for the system remain high in comparison to neighboring areas, although moderate in comparison to second tier out-of-city-limit rates within the county. There are no anticipated rate increases for retail customers in the short term.

Financial operations remain strong. Senior lien debt service coverage from net revenues alone has been over 3 times (x) in each of the last four years. Total revenues have dropped moderately due to declines in connection fees and interest revenues. Total debt service (including senior, subordinate and other obligations) coverage without connection fees was still strong in fiscal 2009 at 1.6x times. Debt service coverage as calculated under the rate covenant, which includes 20% of the cash surplus account, equaled 5.3x times (senior debt) and 3.2x times (total debt) in fiscal 2009. Fiscal 2010 projected coverage from net revenues is 2.4x times for senior debt and 1.8x times for total debt service, which does not include revenues generated from the anticipated 4,000 sewer customers coming on line. Cash on hand was a strong 865 days for fiscal year 2009, including unrestricted capital reserves.

Both the water and sewer systems currently have over 50% capacity remaining based on their daily usage. The pace of expansion of the water system will be determined by future growth, while the sewer system is in the process of expanding its capacity. In addition to doubling the sewer treatment capacity for the largest treatment facility, two additional sewer expansion projects are anticipated pending customer growth. The system's top 10 customers account for close to 35% of total water and sewer revenues; however, the bulk of these sales is on a wholesale basis to entities that serve predominately residential customers.

The county has a sizable capital plan totaling $145 million. Approximately 85% of the plan will be funded by long-term debt, including a $25 million issuance in fiscal 2010 to fund the wastewater system expansions for the cities of Sunset Beach and Calabash. Additional major projects include the expansion of the Northwest water treatment plant, pending future growth in customer demand.

Brunswick County is located in the southeastern portion of North Carolina along the Atlantic Ocean on the South Carolina State border. The county attracts many seasonal visitors to several of its barrier islands, including Bald Head Island, Oak Island and Caswell Beach. The county's 2009 population is estimated at 106,500, which represents a 44% increase from 2000. Median income levels for the county are on par with the state and 87% of the national average.

Additional information is available at 'www.fitchratings.com'.

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