The Peachtree City Water and Sewerage Authority (WASA) recently received a higher bond rating from Standard and Poor’s (S&P) Global Ratings. WASA’s rating moved from AA- to AA+.
“This upgrade in the WASA bond rating reflects what S&P calls a combination of an ‘extremely strong enterprise risk profile and a very strong financial risk profile,’” said JWA Public Communications President Chris Wood.
Wood said the upgrade also reflects S&P’s opinion that WASA has very strong economic and financial metrics, when applied to the S&P revised criteria for utility bond ratings referred to as the “Rating Methodology and Assumptions for U.S. Municipal Waterworks and Sanitary Sewer Utility Revenue Bonds,” published earlier this year.
“WASA has a very good financial record,” said Chairman Bill Holland. “I feel very proud of that and I’m very proud of our staff and manager.”
Asked if the better credit rating might help with an early pay-off of bonds linked to the Peachtree City Council, an entity with a past history of opposing moves to extend sewer coverage to other areas, Holland said to his knowledge that would not make a difference.
One of the bonds will be paid off in 2022, while to second bond will be retired near the end of the next decade, Holland said.
The upgrade in WASA’s overall credit rating reflects S&P’s opinion of the authority’s overall financial capacity, or creditworthiness, to pay its financial obligations, according to Primary Credit Analyst Scott Withrow.
“S&P concluded that WASA has a very strong enterprise risk profile because of four factors,” said Wood. “First, the utility’s service area is broad and diverse, and second, WASA has very low industry risk because it’s a provider of an essential public utility. Third, the utility has affordable service rates in the context of the service area’s income levels. And finally, WASA benefits from good operational management practices and policies.”
Wood said WASA’s very strong financial risk profile, according to S&P analysts, is attributed to four characteristics of the WASA system:
• WASA has extremely strong historical all-in coverage metrics that are expected to continue in the future;
• The utility also has a very strong liquidity position;
• WASA has a moderately high debt-to-capitalization ratio of about 58 percent, with no additional debt plans in the future; and
• WASA benefits from good financial management practices and policies.
“In our opinion, the utility’s overall financial position is sound, characterized by strong coverage and liquidity metrics,” said Withrow. “System liquidity has remained stable and very strong.”
Although the WASA’s unrestricted cash reserves are used to fund ongoing capital improvements to the sewer system for better delivery of services to the utility’s customers, S&P noted that WASA is expected to maintain reserves at levels that are considered very strong in the near future, even when paying for capital projects with cash flow rather than taking on additional debt, Wood explained.
“We are extremely excited to receive this upgrade in our bond rating,” said WASA General Manager Stephen Hogan. “We’ve come a long way over the course of the past several years, working hard to improve services while operating in a fiscally responsible manner. Our board has provided great leadership and oversight, which has equipped our staff with the resources to warrant this most recent favorable bond rating.”