Long Island Power Authority (LIPA) is gearing up to price a significant billion-dollar bond issuance with its fresh leadership team, expiring third-party manager contract, and an upgraded credit rating from Fitch. This bond issuance includes various components aimed at funding capital improvements, retiring existing bonds, and ensuring financial stability for the electric system.
Bond Offering Details
The bond issuance consists of $1.021 billion in electric system general revenue bonds, comprising two series – $736 million of tax-exempt fixed-rate bonds (Series 2024A) and $285 million of tax-exempt fixed-rate mandatory tender bonds (Series 2024B). Series A spans maturities from 2025 through 2044, with term bonds in 2049 and 2054, while Series B features term bonds in 2049. The proceeds from Series A will fund capital improvements and refund existing Series 2014A bonds, while Series B will retire the Series 2019B bonds.
Underwriting Team
Leading the deal as bookrunner is BofA Securities, with Barclays and Ramirez as co-senior managers, and a group of co-managers including Goldman Sachs, J.P. Morgan, Loop Capital Markets, Morgan Stanley, RBC Capital Markets, Siebert Williams, TD Securities, and Wells Fargo. Nixon Peabody is serving as bond counsel, and PFM is the municipal advisor for the issuance.
Recently upgraded to A-plus by Fitch Ratings from A, LIPA’s improved leverage ratio and commitment to gradual deleveraging played a vital role in this rating elevation. Fitch expressed confidence in LIPA’s financial metrics and expects the positive momentum to continue through 2028, showcasing a positive outlook on the authority’s financial stability.
Despite the positive developments regarding the bond issuance, LIPA is facing challenges with the upcoming expiration of its third-party manager contract with the Public Service Enterprise Group Inc. While the authority issued a request for proposals for a new five-year power supply management services contract, the future operator remains uncertain. However, LIPA aims to shift certain risks related to regulatory issues and natural disasters in the new contract, ensuring greater stability and fiscal sustainability moving forward.
Decarbonization Goals and Financial Strengths
Amid New York’s aggressive decarbonization targets, LIPA is focused on aligning its operations with the state’s renewable energy goals. With a strong financial foundation, high credit ratings, and robust liquidity, the authority is well-equipped to navigate the changing energy landscape. Additionally, LIPA’s service areas in affluent counties provide flexibility in setting rates and securing grants to support its operations.
As Long Island Power Authority prepares to price its billion-dollar bond issuance, it faces a mix of opportunities and challenges. With a seasoned leadership team, a strategic approach to financial management, and a commitment to sustainability, LIPA is poised to maintain its position as a key player in the energy sector. By addressing the evolving energy landscape, managing contract transitions, and securing financial stability, LIPA aims to drive continued success and growth in the coming years.