Press Release|Public Finance
KBRA Assigns AA+ Rating to the Power Authority of the State of New York Revenue Bonds, Series 2024A (Green Bonds); Outlook is Stable
11 Sep 2024 | New York
KBRA has assigned a long-term rating of AA+ to the Power Authority of the State of New York Revenue Bonds, Series 2024A (Green Bonds). Concurrently, KBRA has upgraded the long-term rating on parity General Resolution Revenue Bonds to AA+ (from AA). The Outlook is Stable.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Lowest cost power producer in the State with well-maintained, environmentally clean hydroelectric generating assets that account for 70% of the State’s renewable energy.
- Financial strength and resiliency demonstrated through sound operating margins, ample liquidity, strong debt service coverage, and favorably low debt ratios.
- Leverage is expected to remain manageable throughout the capital plan. NYPA’s use of the SFP Transmission Bond Resolution is expected to limit overleveraging of the General Resolution.
- Authority operations benefit from a sophisticated and proactive management team with industry-leading enterprise risk management capabilities.
Credit Challenges
- The Authority operates in a complex, capital-intensive environment, requiring management of exposures to energy, capacity, and fuel price volatility, enterprise level and operating risks, merchant sales exposure, decarbonization risks, and regulatory requirements.
- Financial and programmatic obligations, as well as restrictions to the Authority’s powers, rights, and exemptions from regulation under the Power Authority Act can be imposed on the Authority by action of the State Legislature.
- The potential for an increase in the relative cost of producing hydropower, whether due to competing renewable technologies or to generation levels at its large hydroelectric facilities, poses risk to NYPA’s competitive position and net income.
Rating Sensitivities
For Upgrade
- Further upward migration of the rating is unlikely at the current rating level.
For Downgrade
- A material erosion in the Authority's hydropower cost advantage that negatively impacts its competitive position.
- Difficulty or delay in meeting the substantial responsibilities of the State's CLCPA, including maintaining its hydropower contribution, decarbonizing its small, natural gas-fired peaker plants by 2030, and ensuring sufficient reliability to meet demand.
- Contractual instability between the Authority and its largest governmental customers.
To access rating and relevant documents, click here.