WAPA Bonds Outlook Rated “Stable” by Two of Three Ratings Firms

Two out of three bond credit ratings firms have issued a “stable” outlook for the V.I. Water and Power Authority, which plans to issue a new series of four bonds mid-February.
Standard and Poor’s upgraded its outlook for the bonds from “negative” to “stable,” while Moody’s Investors Service reaffirmed its past outlook of “stable.”
Fitch Ratings kept its outlook at “negative.”
“The negative outlook recognizes that improving cost recovery, stabilizing cash flow and building self-liquidity will take time to materialize before WAPA returns to a stable outlook,” according to Fitch’s rating issued Jan. 28.
WAPA will issue four different series of bonds around Feb. 15, said Nellon Bowry, WAPA’s assistant executive director and chief financial officer, at the January WAPA board meeting.
Essentially reaffirming their previous ratings, all three agencies consider the WAPA bonds to be in the "lower medium grade."
In their rationales for the somewhat cautious rating, all three firms cited the relationship between the V.I. Public Services Commission (PSC) and WAPA.
It is atypical for a munipally-owned utililty, such as WAPA, to also be subject to a government regulatory authority, such as the PSC. Ratings agencies tend to view this arrangement as a risk because the utility does not have full authority over setting its rates.
WAPA officials recently made the rounds of all three ratings companies in New York to discuss WAPA’s bond ratings, accompanied by PSC Chairman Joseph Bosculte.
Boschulte’s presence was a critical move on WAPA’s part as it helped to demonstrate a cooperative relationship between the utility and the body that regulates its rates.
“This makes the relationship between PSC and WAPA become a very important credit-rating consideration,” Bowry said. “In every case, the rating agencies viewed it as positive that the commission chair was part of the presentation team because it gave them the opportunity to hear directly from the chairman the commission’s perspective.”
“Both WAPA and the PSC have made a continuous effort to put the best interests of ratepayers at the forefront,” Bowry said. “In the final analysis, we are working to the same end. There is obviously a change.”
The ratings agencies appeared to have picked up on that change, as evidenced in the supporting documentation for their opinions.
Standard and Poors said they viewed the interaction between the two entities as “improved,” while Moody’s referred to the PSC as “supportive.”
Fitch cited PSC’s actions as “easing near-term cash flow and liquidity pressures” by approving an 11 percent base rate increase.”

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