The Long Island Power Authority plans to sell $200 million of debt in 2009, according to its proposed budget released last week. The utility expects to vote on the plan on Dec. 11 following a public comment period.
Although LIPA forecasts difficult economic conditions will depress sales, higher charges for fuel and purchased power costs implemented this year and next would offset lower sales. Fuel and purchased power costs are expected to rise by 9.2% to $2.2 billion. LIPA projects revenues in 2009 will rise by 7.8% to $3.97 billion.
A five-year forecast calls for $190 million of bonds and notes to be sold in 2010, $60 million in 2011, $115 million in 2012, and none in 2013. The authority hasn't marketed new-money bonds since 2006 when it sold $1.48 billion, according to Thomson Reuters.
Capital expenditures would drop next year from the current year's projected $332.1 million by 16.7%, to a level that would remain fairly constant during the forecast period. Capital spending would range from $246.9 million in 2009 to $261.9 million in 2013.
Debt service would stay fairly constant in the first four years of this period - from $555.7 million to $574.3 million - then drop off in 2013 to $468.6 million. LIPA projects assumed interest rates next year of 6% on fixed-rate debt and 4% on variable-rate debt.
"There wasn't anything surprising in their proposed budget," said Fitch Ratings senior director Michelina Santoro. "It seems as though they are prudently taking into account lower sales forecasts for 2009 as well as adequate adjustment to their fuel and purchase power charge to maintain full recovery of costs."
Fitch assigns LIPA an A-minus with a negative outlook. The negative outlook was added this year after the New York Legislature passed a bill that could have restricted the authority's ability to raise certain charges. That bill was vetoed by Gov. David Paterson, but Santoro said there is concern that Long Island lawmakers might try again.
LIPA benefits from a favorable mix of residential and business customers in a relatively wealthy service area and good cash reserves, Santoro said.
Standard & Poor's assigns LIPA an A-minus and Moody's Investors Service rates it A3 with a stable outlook.