The New York Power Authority offered green revenue bonds to retail investors Monday, fresh on the heels of ratings upgrades from Moody's Ratings and KBRA.
The Power Authority is bringing $404.375 million of green revenue bonds to market this week,
The issuer will price for institutions Tuesday.
Moody's upgraded its rating to Aa1 from Aa2 last week while KBRA upgraded it to AA-plus from AA. The issuer is rated AA by S&P Global Ratings and AA by Fitch.
NYPA Chief Financial Officer Adam Barsky credits its upgrades to years of efforts to improve its fiscal position.
"I think the upgrade is a recognition from the rating agencies of all the things that we've done to improve all of our credit metrics, our liquidity [and] de-leverage our balance sheet, but also make significant investments into growing our transmission footprint throughout the state," Barsky said.
Goldman Sachs is lead underwriter on the deal. HilltopSecurities is the municipal advisor, and Nixon Peabody and Hanrahan Law Firm are co-counsels. The green bond designation was verified by Sustainalytics.
The $404.375 million deal features bonds maturing from 2030 through 2044, with term bonds due in 2049 and 2054.
This is the first time the authority has issued
"It's not surprising the issuer fared well with retail; it's a highly rated credit coming with green utility debt, providing diversification in a week heavy with New York paper," a sell-side source said.
Moody's and KBRA cited several improved credit metrics in their upgrades.
KBRA's rating upgrade referenced NYPA's "sound operating margins, ample liquidity, strong debt service coverage, and favorably low debt ratios."
Moody's also upgraded NYPA's transmission bonds affiliated with separately financed transmission projects (SFTP) to Aa3 from A1.
Moody's cited the Power Authority's "very strong financial and operating performance, the increased revenue diversification relating to the growth of transmission investments through SFP within the NYPA family and the sound credit profile of the State of New York."
"The one notch upgrade of SFP recognizes NYPA's improved credit profile, demonstrated rate recovery for each of its wholly owned projects through FERC regulated rates, as well as the timely and within budget completion of construction for its two inaugural transmission projects," Moody's report said. "SFP's rating also considers the important role its projects have towards achieving New York State's clean energy and electric reliability goals."
Fitch Ratings calculated NYPA's debt service coverage ratio as exceeding 4 times in both 2022 and 2023, and leverage below 3.8 times.
"Total liquidity at year end was 408 days, including 279 days cash on hand," Fitch's report said. "Excluding the operations of the SFTP, and factoring that NYPA has no fixed charges related to its purchased power arrangements, Fitch-calculated leverage totaled only 0.3x at year end 2023."
Fitch projects that leverage ratios will increase modestly through 2027, closer to 6.0 times for the authority and 4.0 times for the power supply system alone, given sustained higher capital spending and future bond issuances.
NYPA also created an SFTP bond credit, which is expected to prevent overleveraging, according to KBRA.
NYPA has been improving these credit metrics for four years, Barsky said, paying down its debts and increasing its liquidity.
"Over that time, we have created a captive insurance company to better manage our risks and get better coverage for lower interest costs," Barsky said. "We've created this separate transmission credit, which … diversifies our credit."
Other large New York issues are pricing this week.
Loop Capital Markets held a one-day retail order for $787.675 million of water and sewer second general resolution revenue bonds from the New York City Municipal Water Finance Authority.
The Port Authority of New York and New Jersey (Aa3/AA-/AA-/) is set to price Wednesday $1.007 billion of consolidated bonds.
