BRADENTON, Fla. – Key West Utility Board officials believe missed communications with S&P Global Ratings landed its bonds on CreditWatch by mistake following Hurricane Irma in Florida.
S&P analysts said Friday that since Irma struck they couldn’t contact the utility board, which operates as Keys Energy Services. They placed about $47.8 million of A-minus rated revenue bonds on CreditWatch with negative implications.
Utility board officials and their financial advisor, Craig Dunlap, told The Bond Buyer on Monday that they were not notified about S&P’s action.
“Interestingly enough we have a bond payment due on Oct. 1, which we are fully funded for and are going to make that a few days ahead of” schedule, said Chief Financial Officer Jack Wetzler.
The upcoming bond payment is about $10.2 million, he said.
Wetzler said he discovered on Monday that two emails sent to him by S&P inquiring about damages had fallen into his junk folder, prompting the utility to initiate a conference call with analysts to discuss the system’s status.
“I think it was a positive conversation,” he said.
Wetzler also said the missed email incident prompted the utility to adopt a new procedure. From now on, the finance department will be pro-active and contact rating agencies after a hurricane.
Key West wasn't as severely damaged by the hurricane as other parts of the 120-mile-long Florida Keys.
Irma made landfall in the Lower Keys Sept. 10, slamming Cudjoe Key as a Category 4 storm with 130 mph sustained winds. Cudjoe is about 20 miles northeast of Key West. Keys Energy supplies its electricity.
Keys Energy Services has 31,000 customers.
The utility board’s progress restoring power has been “very good” with the system at 93% of its capacity, said Lynne Tejeda, general manager and chief executive officer.
Tejeda also said that information on the system’s status had already been obtained by Moody's Investors Service. Moody’s rates the utility board’s bonds A1 with a stable outlook.
“We had correspondence with Moody's late last week and provided them with answers to all the questions they had,” she said.
In a Sept. 11 report, Moody’s analyst Dan Aschenbach said that the Key West Utility Board could absorb substantial damage-related costs because it has strong cash on hand and a fully funded debt service reserve of $4.1 million that equals the utility’s maximum annual debt service.
“Importantly, Key West Utility Board completed a significant transmission and distribution reliability improvement project that added a second transmission line to the mainline” of Florida, he said.
The utility now meets a reliability requirement with on-island generation of 111 megawatts, which can supply at least 60% of peak demand, “which is important if the transmission lines to the mainland are adversely affected by the storm,” Aschenbach said.
The board also is nearing completion on a storm-hardening project that includes spending $4.5 million for pole replacement across its service territory, which spans from Key West to the Seven Mile Bridge but does not include Marathon.
In its report Friday, S&P said that analysts heard suggestions that up to 25% of the homes in Key West had been destroyed by the hurricane.
Dunlap said the 25% figure is based on damage estimates throughout the Keys that were released by the Federal Emergency Management Agency, and it largely reflects residents’ homes that are not in Keys Energy Services’ territory.
The city of Key West, which is in Monroe County, has a population of about 27,000, according to the July 1 estimate by the U.S. Census. Monroe County has about 79,000 residents.
On Monday, Gov. Rick Scott announced activated 400 members of the Florida National Guard and 40 trucks to help families in the Keys remove debris and clean out flood damage from residential areas.
“We know the Florida Keys were hit especially hard by Hurricane Irma this month, and have been working nonstop to get the Florida Keys back open,” Scott said.
The archipelago is highly dependent on tourism. Many, but not all, facilities are up and running.
In Key West, tourists are already returning. The first cruise ships since the hurricane arrived at the Port of Key West on Sunday.
Unincorporated government officials announced Monday that the rest of the island chain will reopen to visitors Oct. 1, although they advised contacting lodging, RV resorts, and other tourism facilities before arriving.
“We know we have a long way to go before the Keys fully recover,” said Monroe County Mayor George Neugent. “But because tourism is our top economic engine and many of our residents’ livelihoods depend on it, we also know that we need to begin asking visitors to return.”
