Fitch Ratings downgraded the Long Island Power Authority’s senior revenue bonds to A-minus from A on Sept. 5. The downgrade affects $5.9 billion in debt. Fitch maintains a negative outlook on the bonds.
The severe political and public criticism of LIPA following its response to Hurricane Sandy reduced the authority’s ability to increase rates, Fitch managing director Dennis Pidherny wrote.
For its rating level, the authority remains heavily leveraged and financial metrics remain weak, Pidherny wrote.
Recent legislation will increase regulatory oversight of LIPA. Fitch’s continued negative outlook on LIPA reflects rate pressures that are likely to remain high over the near-term and uncertainty about future financial goals and policies, Pidherny wrote.
On the plus side, the authority is progressing with recovering costs from Hurricane Sandy. LIPA also has an improved power supply mix, an affluent customer base and approved rate mechanisms to stabilize cash flow, Pidherny wrote.
Moody’s Investors Service downgraded LIPA’s senior bonds to Baa1 from A3 in May, citing Hurricane Sandy primarily. Standard & Poor’s put LIPA’s A-minus rating on CreditWatch Negative in early July.
In late June New York government adopted a plan to make LIPA a holding company with operations run by PSEG. It also reduced LIPA’s ability to set rates through 2015.
