Moody’s puts Guam Power Authority rating on review for downgrade

Moody’s Investors Service put the Guam Power Authority revenue bonds’ Baa2 rating on review for a possible downgrade following damage from Typhoon Mawar that hit the territory in late May.

Moody’s on Wednesday said the downgrade review stemmed from Mawar’s damage to the territory and “to a lesser extent to GPA’s infrastructure,” said William Oh, Moody’s lead analyst.

“The typhoon caused damage and destruction to commercial, industrial and residential structures, which we expect will weaken load until major recovery and restoration can be completed,” Oh said. “We expect some weakening of the economic base and employment levels as the recovery of tourism to Guam is delayed.”

Over the last two decades, the GPA has been preparing for a major typhoon like Mawar. “These preparations likely mitigated what could have been substantially more damage from Typhoon Mawar and also likely accelerated the recovery timeline,” Oh said. The authority expects to have 95% of power restored before the end of June.

Oh said ratings could be downgraded if “there is a sustained erosion of the utility’s financial metrics, including a meaningful reduction in days cash on hand below 90 days and decline in fixed charge coverage levels below 1.2X; the failure to satisfy the terms of the consent decree with the U.S. Environmental Protection Agency; or an inability to reliably provide sufficient power to customers following the replacement of existing facilities.”

The Guam Power Authority did not respond to a request for a comment.

As of June 30, 2022, GPA had $502 million of revenue bonds outstanding. A more recent figure could not be immediately found.

The bonds are rated BBB with stable outlooks by S&P Global Ratings and Fitch Ratings.

At the end of May, Moody’s said it was assessing the typhoon’s impact on its municipal bond issuers. In March the rating agency raised the outlook to positive from stable on the Ba1 rating of the territory’s general obligation, special tax rating, and the Ba2 rating on its certificates of participation.

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