GPA announces successful sale of refinancing bonds
Updated: Apr 14, 2022
By Pacific Island Times News Staff
Guam Power Authority today announced the successful sale of its revenue refunding bonds in New York on Tuesday. General Manager John Benavente said the bond sale will generate up to $10 million in cash flow savings in peak debt service years to accommodate capital payments for the new Ukudu power plant that is expected to begin operation in 2024.
Benavente said despite a market environment that has seen an outflow of funds in recent weeks due to increasing treasury rates and rising inflation, GPA achieved a net present value savings of $5.8 million with an all-true interest cost of 4.3 percent.
The successful sale of $257.6 million in refunding bonds will refund $285.8 million of outstanding GPA 2012 bonds, reducing the overall debt by $28.2 million.
GPA received $728 million of total orders from 20 institutional investors for the entire series of bonds.
The bond issuance was authorized under Bill 213-36, which became Public Law 36-91 after it was signed by the governor on April 11.
"This is a huge step in the direction of our Clean Energy Master Plan," Benavente said. "Guam is another step closer to achieving 50 percent renewable energy by 2035 and 100 percent by 2045.”
The bonds will refund the outstanding 2012 Series A bonds for settlement on July 7.
According to Benavente, all components represent immense progress for ratepayers and residents.
Benavente said the enactment of Bill 213-36, the selling of revenue bonds and the addition of the latest solar farm "are all integral parts of Guam’s remarkable energy future – a stable system that produces cleaner energy, fewer emissions, and with greater efficiency."
He added, "The fuel savings that we will achieve will ultimately lead to lower power costs for our people. This is a significant win for everyone.”
On April 11, GPA received a BBB rating from Fitch Ratings, reflecting the authority’s financial performance during 2018–2021, which reduced leverage and improved liquidity.
"The ratings also reflect strong revenue defensibility offset by high operating risks and low affordability, primarily driven by the challenges of providing electric service to the remote and electrically isolated island of Guam," Fitch Ratings said.
Fitch Ratings said it expects GPA’s financial performance to remain stable over the near term, even with rising oil prices, based on GPA’s practice of quickly recovering increased costs through rates.
However, Fitch expects GPA’s leverage ratio, measured as net adjusted debt/adjusted funds available for debt service, will increase to a peak of 9.7 times over the five-year horizon under Fitch’s standard stress case scenario, as the authority implements its integrated resource plan and takes possession of a new combined-cycle generating facility under a capital lease.
Fitch expects the authority to significantly increase base rates to help achieve GPA’s stated financial targets and moderate leverage at approximately 9.0x, consistent with the BBB rating.
Fitch’s analysis includes consideration of asymmetric risks related to military customer concentration and electric system fuel concentration