S&P Goes Negative on LIPA

Standard & Poor’s on Thursday revised its outlook on the Long Island Power Authority to negative from stable and affirmed the A-minus rating on its $6.6 billion of bonds outstanding.

“The outlook revision reflects our view that protracted power outages following Superstorm Sandy contribute to a political climate that diminishes the utility’s rate-making and financial flexibility,” analysts said in a report.

Reduced rate-making flexibility might impair LIPA’s financial risk or operating profile if it cannot recoup from customers portions of the estimated $850 million of storm recovery costs that the Federal Emergency Management Agency will not reimburse, the report said.

The revised outlook also reflections the agency’s view of the resignations of key utility officials, which coincided with criticism of LIPA’s management in the wake of the storm outages.The authority’s chief operating officer, its board chairman, a trustee, and the vice president of customer service have all resigned.

“We believe the departures have a void that could frustrate timely and appropriate management of the financial, operational, customer relations, and political challenges the utility faces in the storm’s aftermath,” analysts said.

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