FITCH Ratings has affirmed the rating for Guam Waterworks Authority’s $209.7 million outstanding water and wastewater revenue bonds as 'BB,' indicating a stable outlook for the water utility. The bonds are senior lien bonds secured by GWA’s net system revenues.
According to Fitch, GWA's financial results are currently favorable, citing that the utility’s performance, while historically weak, has improved as a result of actions by GWA's ratemaking bodies.
Fitch added: “Further gains are projected for fiscal 2012 and continued solid results are budgeted for fiscal 2013.”
On elevated debt and capital pressures, the agency said “debt levels are high and significant capital needs remain to meet ongoing regulatory requirements, which could challenge future financial results.”
In addition, Fitch further stated that additional capital spending will ultimately be needed to meet expected military buildup demands.
“While there is some expectation that a portion of GWA's capital needs will be funded by the U.S. Department of Defense, the federal budget debate has created significant uncertainty as to timing and amount,” Fitch pointed out.
In terms of political willingness to raise rates, Fitch also noted “over the last several years, rates have escalated significantly to high levels in order to support GWA's capital improvement program.”
Moreover, Fitch said significant additional needed rate hikes will further pressure customers and could ultimately test the political willingness to raise rates by the Consolidated Commission on Utilities, the Public Utility Commission, and the government of Guam.
Fitch further noted that “leadership actions are positive since management has made substantial progress to date in addressing remedial actions and improving operating performance.”
However, the rating agency also noted the utility’s “limited economic profile,” pointing out “the service territory is isolated and limited and has had a historical disposition to natural disasters.”
Fitch affirms GWA’s ‘BB’ rating
- Thursday, 18 Oct 2012 03:00am
- BY LOUELLA LOSINIO | VARIETY NEWS STAFF
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