Moody's Assigns Baa2 Rating to Guam Waterworks Authority's Water and Wastewater System Revenue Bonds

Strategic Insights -

The Guam Waterworks Authority's (GWA) plan to issue $268 million in Water and Wastewater System Revenue Bonds, Series 2025A, has been awarded a Baa2 rating by Moody's Investors Service. This rating is consistent with GWA's solid financial position, strong debt service coverage, and vulnerability to volatile energy costs and aging infrastructure. GWA's rating is one notch higher than the Government of Guam's issuer rating but is constrained by its linkages to the territory's small and concentrated economy, low resident income levels, and high exposure to physical climate risks.

Key Takeaways:

  • Moody's has assigned a Baa2 rating to GWA's planned issuance of $268 million Water and Wastewater System Revenue Bonds, Series 2025A, and affirmed the Baa2 rating on GWA's outstanding water and wastewater system revenue bonds ($584 million outstanding at the end of fiscal 2024).
  • The Baa2 rating incorporates GWA's solid financial position, debt service coverage (1.8 times in fiscal 2024), and vulnerability to volatile energy costs and large capital costs needed to meet regulatory requirements and replace aging infrastructure.
  • GWA's rating is constrained by its linkages to the territory's small and concentrated economy, low resident income levels, and high exposure to physical climate risks, reflected in the authority's E-4 environmental issuer profile score.
  • The bonds benefit from strong legal provisions, including a 1.25 times rate covenant and a springing debt service reserve currently required to be funded at maximum annual debt service.
  • GWA will continue to be challenged by volatile energy costs and increasing capital needs to meet regulatory requirements, but these challenges are mitigated by strong system management and close coordination with the US Environmental Protection Agency.

Statistics:

  • Tax-exempt debt service coverage: 1.8 times in fiscal 2024
  • Outstanding tax-exempt debt: $584 million
  • Cash on hand at the end of fiscal 2024: 237 days
  • Environmental issuer profile score: E-4

Sources:

  • Moody's Investors Service, "Moody's Rates Guam Waterworks Authority's $268 Million Water and Wastewater System Revenue Bonds, Series 2025A"
  • Moody's, "US Municipal Utility Revenue Debt" (March 2024), Available at https://ratings.moodys.com/rmc-documents/416489.