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Electric utilities

LIPA's Takeover Proposal for LILCO Faces Hurdles

Strategic Insights

— 1 min read

The Long Island Power Authority's (LIPA) proposal to take over Long Island Lighting Company (LILCO) has encountered significant obstacles, largely due to a lack of support from Governor George Pataki. Key to the proposal's success would be Pataki's backing, especially given the substantial amount of public financing involved. However, Pataki's stance on the takeover remains unclear, although he seems to be open to some form of state ownership. In the meantime, Duff & Phelps Credit Rating Co. views the proposal as credit-neutral for LILCO, citing its limited chances of success.

Key Takeaways:

  • The Long Island Power Authority's (LIPA) proposal to take over Long Island Lighting Company (LILCO) lacks support from Governor George Pataki, a crucial requirement for its success.
  • The proposal involves refinancing LILCO's debt with approximately $5.5 billion of tax-exempt revenue bonds and a 20% rate reduction over three to five years.
  • LIPA's takeover proposal is considered credit-neutral by Duff & Phelps Credit Rating Co. due to its limited chances of implementation.
  • Long Island Lighting Company provides electric and gas services across 1,230 square miles in Nassau and Suffolk counties and the Rockaway Peninsula in Queens County.
  • Governor Pataki is attempting to gain control of the democrat-controlled LIPA board to potentially alter the course of the takeover proposal.
  • Duff & Phelps Credit Rating Co. has expressed skepticism about the proposal's viability, attributing it to its limited chances of success.

Statistics:

  • $5.5 billion: The proposed amount of tax-exempt revenue bonds for refinancing LILCO's debt.
  • 20%: The proposed rate reduction over three to five years as part of the LIPA takeover plan.
  • 1,230 square miles: The area covered by Long Island Lighting Company's services, encompassing Nassau and Suffolk counties and the Rockaway Peninsula in Queens County.

Sources:

  • PRNewswire, "The Long Island Power Authority's (LIPA) most recent proposal to takeover Long Island Lighting Company (LILCO) appears highly problematic with little chance of success in its current form."
  • Duff & Phelps Credit Rating Co., views the proposal as credit-neutral due to its limited chances of success.
  • Release Contacts: Catherine E. Drake of Duff & Phelps, 312-368-2065.

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