S&P says LIPA not headed for near-term downgrade
NEW YORK, March 3
NEW YORK, March 3 (Reuters) - The Long Island Power Authority (LIPA) is no longer facing the risk of an imminent downgrade to its credit rating but the long-term outlook for the New York state utility company is still negative, Standard & Poor's Ratings Services said on Monday.
LIPA, a public entity which was heavily criticized for its response to Superstorm Sandy in 2012, was overhauled by the state last year. Its debt was restructured and New Jersey utility PSEG was brought in to manage the firm's operations.
S&P credit analyst David Bodek said the securitization of nearly $2 billion would not lower customer bills as the restructuring had intended, which could inhibit the firm's financial flexibility.
"Combined securitization and unsecuritized debt service will closely parallel pre-securitization debt service, which could perpetuate customers' and politicians' rancor regarding the utility's rates and potentially constrain financial flexibility," he said.
LIPA had around $7 billion of debt, a large part of which relates to the cost of constructing and financing the now-abandoned Shoreham nuclear power plant. The state said during the restructuring debt service costs were about 10 percent of consumer bills.
S&P placed LIPA on credit watch in July last year. The agency rates LIPA A-minus, a medium investment grade, with a negative outlook.
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