NEW YORK–(BUSINESS WIRE)–
Fitch Ratings has affirmed the following ratings for the Virgin Islands Water and Power Authority (WAPA):
–$156,550,000 electric system revenue bonds, series 2003, 2010A, 2010B, 2010C, 2012A at ‘BB’;
–$109,340,000 electric system subordinated revenue bonds, series 2007A, 2012B, 2012C at ‘BB-’.
The Rating Outlook on all bonds is Negative.
The electric system revenue bonds are secured by a pledge of net electric revenues and certain other funds established under the bond resolution. The electric system subordinated revenue bonds are secured by a pledge of net revenues that are subordinate to the pledge securing the electric system revenue bonds.
KEY RATING DRIVERS
WEAKENED FINANCIAL METRICS: WAPA’s financial metrics have deteriorated in recent years to speculative-grade levels reflecting escalating fuel prices, delays in cost recovery, higher receivables and increased reliance on short-term debt financing. Fitch-calculated debt service coverage has remained below 1.0x since fiscal 2010 and the ability to meet financial targets remains uncertain.
INADEQUATE AND REGULATED COST RECOVERY MECHANISMS: The authority’s electric rates are regulated by the Virgin Islands Public Service Commission (PSC), which has authorized cost recovery through both base rates and a levelized energy adjustment clause (LEAC) for fuel and other related costs. Although the PSC been reasonably responsive to requests for cost recovery in recent years, delays inherent in both the regulatory process and the recovery mechanism impair liquidity and limit financial flexibility.