Moody’s Investors Service revised the V.I. Water and Power Authority’s financial rating outlook from “negative” to “stable" this week according to WAPA. Utility officials said in a statement they believed the move was a reflection of improvements in WAPA’s financial position and the near completion of the fuel conversion program, switching the utility from petroleum to less expensive natural gas and other fuels.
In Thursday’s action, Moody’s also affirmed the rating for WAPA, including its approximate $140 million in senior revenue bonds at “Baa3” and $110 million of subordinate revenue bonds at “Ba1.”
“I am very encouraged by today’s announcement from Moody’s, one of the “big three” rating agencies. WAPA continues to take major steps forward in fulfilling its strategy to diversify its generation portfolio, at the same time, improving efficiency and adding renewable energy sources to the electric grid,” WAPA Executive Director Hugo Hodge said Tuesday afternoon.
The significance of today’s announcement is that now all three rating agencies have improved the authority’s financial outlook to stable, Hodge said, predicting WAPA will continue to see positive results in its financial ratings as WAPA improves its competitive position through rate cuts for its customers and moves away from complete dependence on fuel oil.
A statement by Moody’s said the “stable outlook assumes the progress WAPA has made in diversifying its fuel sources and lowering the cost of electricity for Virgin Islands ratepayers will continue to bear fruit and that the cost recovery and surcharge mechanisms approved by the Public Services Commission will support relatively stable cash flow metrics that are appropriate for the rating.”
“This action is indicative of all of WAPA’s efforts to lower the cost and improve the reliability of electricity in the Virgin Islands. While Moody’s was high on the ongoing conversion to LPG, it also took note of the strides being made to increase solar capacity to the grid as well as our efforts to develop smart grid through the introduction of Automated Metering Infrastructure as was presented to the rating agency earlier this year,” Hodge said.
“I consider today’s rating announcement to be quite fair as it adequately reflected the challenge of operating a public utility within an island economy. The ratings considered the historically slow payment of the government and perhaps most importantly the fact that, unlike the majority of publicly owned electric utilities in the U.S., WAPA’s rates are subject to the approval of the PSC,” Hodge said.
He added that the rating recognized the regulatory support the utility has received as it has progressed towards the near completion of the conversion from oil fuel to tri fuel. “This has had the effect of lowering the rates which reducing the deferred fuel balances and associated debt burden," he said.
“In addition, the rating acknowledged the steady financial improvements that have occurred at WAPA over the past several years,” he said.