KBRA Upgrades Power Authority of the State of New York's Green Transmission Project Revenue Bonds to AA; Outlook Stable
27 Sep 2024 | New York
KBRA has upgraded the long-term rating of the Power Authority of the State of New York's (NYPA) Green Transmission Project Revenue Bonds (GTPRB) to AA, from AA-, with a Stable Outlook.
The rating upgrade reflects NYPA's successful completion of its initial separately financed transmission projects on-time and within budget, the broad, statewide ratepayer base, and the established and comprehensive cost recovery of the annual Separately Financed Project (SFP) Transmission Revenue Requirement pursuant to a Federal Energy Regulatory Commission (FERC) approved formula rate.
Key Credit Considerations
The rating is upgraded because of the following key credit considerations:
Credit Positives
- All eligible SFP Transmission Project costs must be rate regulated (or be expected to become rate regulated), allowing for full cost recoverability and revenue predictability.
- Transmission revenues are collected through NYISO, whose customers comprise a broad, essentially statewide rate base of about 20 million ratepayers.
- SFP Transmission Projects are essential to New York State’s ambitious decarbonization strategy.
Credit Challenges
- SFP Transmission Projects are largely debt financed and highly levered, although leverage should moderate longer-term as the SFP projects are put into service.
- Revenue pledge for the transmission bonds is limited to the net revenues of solely the SFP Transmission Projects, plus available liquidity and reserves under the Transmission Bond Resolution.
Rating Sensitivities
For Upgrade
- A positive change in FERC’s methodology for the transmission rates and cost recovery, resulting in financial coverage materially above budget and the rate covenant.
- Moderation in leverage as SFP Transmission Projects are completed and placed into service.
For Downgrade
- An adverse change in FERC’s methodology for the annual transmission revenue requirement and formula rate for the SFP Transmission Projects that is not supportive of the 1.20x minimum DSCR.
To access rating and relevant documents, click here.