Moody’s Investor’s Service said that the restoration costs from the aftermath of Hurricane Sandy could further weaken the Long Island Power Authority’s financial condition.
Moody’s currently rates approximately $6 billion of LIPA’s general revenue bonds at A3, with a negative outlook.
LIPA’s financial condition could weaken if liquidity measures are not strengthened and rate recovery, disaster relief, and insurance compensation are not received in a timely manner, Moody’s said in a report.
LIPA did not immediately respond to a request for comment.
The agency has about $500 million of cash on hand, but liquidity will be reduced by about $250 million following a Dec. 1 debt service payment, according to the report.
LIPA does not have a debt service reserve fund in its indenture, a credit weakness Moody’s has noted in its credit rating report.
“Substantial storm-related costs will be an additional call on liquidity but we anticipate that the major cash outflows will not occur for a few months until after contractors complete their respective audit and billing process,” analysts said.
LIPA has indicated to Moody’s that it is close to establishing new credit lines of about $300 to $500 million which would bolster its liquidity.
Gov. Andrew Cuomo said that New York will ask for 100% reimbursement from the Federal Emergency Management Agency for storm-related costs, but how quickly the funds are received remains uncertain. LIPA has still not received its full $100 million reimbursement from FEMA for last year’s Hurricane Irene damages.
“On the positive side, we understand that LIPA’s power supply sources were not heavily impacted including the underwater transmission lines that bring energy to the island,” Moody’s analysts said.
LIPA is a non-profit municipal electric utility that serves more than 1.1 million customers in Nassau and Suffolk counties, and the Rockaway Peninsula in Queens.
