Long Island Power Authority (LIPA) is gearing up to issue a $1.021 billion bond, with a fresh leadership team and an improved rating from Fitch. The bond will consist of $736 million of tax-exempt fixed-rate bonds and $285 million of tax-exempt fixed-rate mandatory tender bonds. Series A will fund capital improvements and refund existing bonds, while Series B will retire previous bonds. The bond issuance is a routine practice for LIPA, which typically issues bonds annually for its capital programs. The deal is expected to perform well, backed by positive financial metrics and the recent upgrade from Fitch.
LIPA operates under a third-party management contract, which is set to expire soon. The authority has issued a request for proposals seeking a new power supply management services contract. While the possibility of bringing operations in-house was considered, it did not materialize. The new contract will have modifications to allocate some risks from ratepayers to the third-party operator, offering stability and fiscal sustainability regardless of the operator managing LIPA’s operations.
LIPA is undergoing a significant transition in leadership, with the CEO and several high-ranking employees resigning recently. Despite the departures, the current leadership emphasizes continuity in operations and a commitment to delivering value to customers. The new leadership team consists of experienced professionals with years of expertise in the finance and utility sectors. The focus remains on implementing long-term fiscal sustainability policies to drive the organization forward.
New York’s ambitious decarbonization goals pose a challenge for LIPA, requiring a shift towards renewable energy sources. The state aims to achieve 70% electricity generation from renewables by 2030 and a zero-emissions electric system by 2040. However, LIPA’s strong financial position, stable coverage of fixed costs, and robust liquidity provide a solid foundation for meeting these goals. The authority’s service areas in affluent counties also offer flexibility in rate setting, enabling it to navigate the transition towards cleaner energy sources.
Long Island Power Authority is at a pivotal moment with a bond issuance, leadership changes, and evolving sustainability goals. The organization’s ability to adapt to contractual shifts, maintain financial stability, and leverage its business model will be crucial in navigating future challenges. With a dedicated leadership team, a proven track record in the finance sector, and a focus on long-term sustainability, LIPA is well-positioned to address the changing landscape of the power sector and meet the demands of a transitioning energy market.