By Johnnie Rosario
(Tumon, Guam) Fitch credit rating agency just gave Guam Power Authority an improved credit score. GPA improved its credit rating on its revenue bonds from BBB- to BBB. Both ratings are investment grade.
The ratings were anticipated since the last time Fitch rated GPA with a BBB- with a positive outlook. Much of that positive outlook was tied to GPA's fidelity to its Integrated Resources Plan and its financials.
"GPA's operating cost burden is high, broadly reflecting the challenges of serving an island territory including higher than normal costs for fuel, labor and the need for excess capacity to ensure reliability," Fitch stated in its credit rating report. The stable outlook is a 'wait and see' for creditors, who are relying on GPA to increase the power base rate in order to fund future capital improvement projects in GPA's IRP.
But those projects, once online, will mean that GPA will be able to provide longterm decreases in its fuel recovery charge rate, which for most residents and businesses is the bulk of the power bill. This is because more of the island's power generation system will be produced using renewable and cheaper sources of energy.
“This improved investment grade rating is a positive confirmation of GPA’s continuous operational improvements and commitment to strengthen its financial health,” said GPA General Manager John M. Benavente, P.E. “This is definitely great news for all ratepayers, the Authority and our island,” Benavente added. “The upgrading of bond ratings is similar to the upgrading of one’s personal credit score; this signifies lower borrowing interest rates for GPA and lower cost(s) to ratepayers,” continued Benavente.
The rating agency highlighted some of the following factors in assigning the GPA rating upgrade:
GPA being the sole provider of electric service on Guam and its strong service area characteristics supported by the U.S. military presence.
Guam’s steadily growing economy and gross domestic product(GDP) in recent years contributing to declining unemployment, solid household income and customer growth.
The 1% steady growth of customer accounts since 2014.
Tourism and the U.S. military contributing to Guam’s economy and electricity demand on the island; and
GPA’s commitment to implement its 2016 Integrated Resource Plan (IRP) as a means to modernize its fleet, provide fuel diversity and comply with environmental regulations imposed by the U.S.EPA.
“In recent years, notwithstanding many challenges, GPA’s focus on improving system reliability, operational efficiency and fuel cost recovery contributed in great part to the Authority attaining this improved rating, to include the recent approval to build the new Ukudu power plant which will result in lower cost(s), and more efficient and flexible resources capable of supporting an expanded renewable resource utility portfolio,” remarked Benavente.
“The future for power on Guam includes GPA’s progress through the governance of the Consolidated Commission on Utilities and the oversight of the Guam Public Utilities Commission, as well as the dedicated professionalism and performance of GPA’s workforce, who serve to deliver improvements that benefit all ratepayers and improve the quality of life for all of us who call Guam home,” concluded Benavente.