KBRA Assigns AA- Rating, Stable Outlook to the Power Authority of the State of New York (NYPA) Green Transmission Project Revenue Bonds, Series 2023A
29 Sep 2023 | New York
KBRA has assigned a long-term rating of AA- with a Stable Outlook to the Power Authority of the State of New York (NYPA) Green Transmission Project Revenue Bonds, Series 2023A. Concurrently, KBRA affirms the AA- rating and Stable Outlook on NYPA's outstanding Green Transmission Project Revenue Bonds.
The rating reflects the broad (essentially statewide) customer base upon which NYPA can recover 100% of the annual Separately Financed Project (SFP) Transmission Revenue Requirement pursuant to a Federal Energy Regulatory Commission (FERC)-approved formula rate.
The rating further reflects the strategic role the SFP Transmission Project is expected to play in helping New York State achieve the aggressive clean energy goals of its 2019 Climate Leadership and Community Protection Act. These credit positives are partially offset by the narrow pledge of SFP Transmission Revenues which, while collected on a broad geographic base, include only the regulated, recovered cost of designated SFP Transmission Projects, net of operating expenses, plus liquidity and reserves within the Transmission Bond Resolution. The SFP Transmission Project’s limited operating history further constrains the rating.
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
- 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.
- SFP Transmission revenues are collected through NYISO, whose customers comprise a broad, essentially statewide rate base of over 20 million ratepayers.
- The SFP Transmission Project is essential to New York State’s ambitious decarbonization strategy.
- The scope of the GTPRB pledge is limited. Bonds are solely secured by net revenues of SFP Transmission Projects, plus available liquidity and reserves under the Transmission Bond Resolution.
- SFP Transmission Project leverage is expected to increase upon the issuance of the proposed Series 2023A Bonds, but subsequent moderation in leverage is anticipated as the SPC project is put into service.
- A positive change in FERC’s methodology for the ATRR and Formula Rate, resulting in financial performance materially above the 1.20x rate covenant.
- Moderation in leverage as SFP Transmission Projects are completed and placed into service.
- An adverse change in FERC’s methodology for the ATRR and Formula Rate for SFP Transmission Projects that is not supportive of the 1.20x minimum DSCR.
To access rating and relevant documents, click here.