Moody’s has changed the outlook for Guam Power Authority’s senior lien revenue bonds ratings from stable to negative.
“The change in the rating outlook to negative reflects Moody's assessment of the linkage between GPA and the financial health and stability of the Government of Guam,” according to Moody’s. “The change in the rating outlook to negative reflects Moody's assessment of the linkage between GPA and the financial health and stability of the Government of Guam.”
While GPA operates fairly independently from the government, Moody’s said it expects the utility agency would not be able to disconnect itself from the local economic conditions or material financial stress at the government level.
“Until now, the government has remained current on paying its bills and there has been no pressure to receive transfers from GPA,” Moody’s said. “The government of Guam represented around 15 percent of GPA's fiscal year 2017 electric revenue. A deterioration of government finances or local economic conditions could put pressure on outstanding receivables and customers' ability to pay their bills.”
In addition, Moody’s said the Public Utility Commission's willingness to support rate increases could weaken during time of economic stress. The levelized energy adjustment clause rate, which accounts for the volatility of fuel costs, was recently increased in February 2018.
This latest change follows a similar change for Guam Waterworks Authority bonds and for the Government of Guam’s issuer rating. Additionally, S&P last week, noted that Guam’s General Obligations bonds and certificates of participation. Both agencies expressed concern regarding the federal Tax Cuts and Jobs Act, resulting in a $67 million reduction in revenue for the remainder of the fiscal year, which ends in September.