Guam News - Guam News

Guam - The rating agency Fitch has affirmed the ratings on $579-million in Guam Power Authority bonds.

According to a news release issued by Fitch GPA's bonds have been re-confirmed at the following ratings:

--$523.3 million senior revenue bonds at 'BBB-';
--$56.1 million subordinate revenue bonds at 'BB+'.

The Rating Outlook on all bonds is Stable.

A BBB- rating is Lower Grade rating, but not quit junk bond status. However BB+ is considered Non-investment grade and speculative which is junk bond status.

READ the Fitch release on BusinessWire.com HERE

In re-affirming its ratings on the GPA Bonds Fitch cites the following factors:

SOLE PROVIDER ISLAND SYSTEM: GPA benefits from its position as the sole provider of retail electricity to the 175,000 residents of the island of Guam, the western-most territory of the U.S. The island economy is supported by the heavy and increasing presence of the U.S. Navy, the system's largest customer (18.2% of total revenue).

SUBJECT TO RATE REGULATION: GPA's electric rates are regulated by the local Public Utility Commission (PUC), which limits the authority's financial flexibility and may delay the timing or amount of rate increases necessary to meet operating costs. Recent base rate increases, fuel cost recoveries, and changes to GPA's rate structure are viewed favorably by Fitch.

WEAK LIQUIDITY: GPA's working capital fund is exposed to fluctuations in fuel prices and a levelized energy cost recovery mechanism that does not guarantee timely recovery of fuel related costs.

NO FUEL DIVERSITY: Generation resources on Guam are 100% fuel-oil based which exposes GPA to market price volatility. GPA is finalizing an updated integrated resource plan (IRP) that is expected to address fuel diversity and the potential of adding renewable sources to the resource mix. However, progress toward diversification is expected to be slow.

ECONOMY TIED TO TOURISM: The Guam economy is heavily influenced by tourism and has been negatively affected by the global economic slowdown and the March 2011 earthquake and tsunami in Japan. Civilian visitors declined 2.3% in fiscal 2011, but fiscal 2012 visitors through March are 6.2% higher.