OREANDA-NEWS. August 03, 2015.  Fitch Ratings has affirmed the 'F1+' rating on the New York Power Authority's (NYPA) \\$1.2 billion maximum commercial paper (CP) program and \\$200 million extendible municipal commercial paper (EMCP) notes. As of July 25, 2015, NYPA has \\$481.96 million of commercial paper and \\$49.2 million of EMCP notes outstanding.

SECURITY

The CP notes (and series 2012 subordinate notes) are secured by a revenue pledge subordinate to the payment of operating and maintenance expenses and debt payments on NYPA's senior lien revenue bonds (\\$1 billion outstanding).

KEY RATING DRIVERS

STRONG LONG-TERM RATING AND LIQUIDITY: NYPA's 'AA' long-term credit quality and various sources of liquidity support the 'F1+' rating on its CP program. Total internal and external liquidity sources provide coverage of maximum potential requirements that are well in excess of Fitch's target for 'F1+' short-term ratings.

SOUND LONG-TERM CHARACTERISTICS: NYPA is the largest nonfederal power producer in the U.S., serving a diverse customer base throughout New York State, primarily from a largely 'green' hydropower resource mix. NYPA's hydroelectric power supply is exceptionally low cost for the state and region (on average, less than 2.0 cents per kilowatt hour [kwh]). NYPA's revenue mix is based upon mainly contractual power sales at terms that allow for at least some rate adjustments when needed.

SOLID FINANCIAL PERFORMER: NYPA maintains a strong balance sheet (58.5% equity capitalization), healthy cash flow and debt service coverage averaging more than 2.5x for the past five years (greater than 1.60x coverage of full obligations), which exceeds Fitch 'AA' median levels.

MODERATE VARIABLE-RATE EXPOSURE: NYPA maintains a moderate gross variable-rate debt exposure (mostly CP) of 23.3% of total debt, as of Dec. 31, 2014. These variable-rate securities are subject to remarketing and interest rate risks. On a net basis, taking into account financial hedges, the variable-rate exposure declines to 19.3%.

TRANSFERS TO NYS GENERAL FUND: NYPA's annual voluntary contributions to the state general fund represent an ongoing credit risk as the level of these transfers can vary. The transfers are subject to NYPA Board approval and maintenance of a 2x debt service coverage, prior to transfer. Expected transfers for fiscal 2015 totaling \\$90 million are in line with budget estimates.

RATING SENSITIVITIES

RATING STABILITY: The strength and stability of the New York Power Authority's long-term credit rating ('AA'/Positive Outlook), coupled with its healthy liquid resources, should continue to support the 'F1+' rating on NYPA's commercial paper program.

CREDIT PROFILE
NYPA is an integrated, primarily wholesale provider of electricity throughout New York State. It is the nation's largest quasi-state owned electric utility, with 16 generating facilities across the state and more than 1,400 miles of transmission. NYPA serves customers primarily via contracted wholesale power sales to municipal, rural electric and investor-owned utilities, direct industrial users, public corporations, and several out-of-state utility customers. NYPA owned and contracted generation account for net dependable capacity of approximately 6,000 MW. Annual revenues for fiscal 2014 were \\$3.2 billion.

NYPA'S CP PROGRAM
NYPA maintains a maximum authorized CP program of \\$1.2 billion, and a \\$200 million authorization for EMCP, each pursuant to separate resolutions. In the past four years, NYPA has not had more than \\$500 million CP outstanding at any one time. As per the CP resolution, NYPA's outstanding CP is limited to the amount of the bank-provided revolving credit agreement (RCA) supporting the CP notes (RCA sized at \\$600 million currently). The RCA is provided by a syndicate of large banks, with solid short-term ratings of 'F1' or 'F1+' by Fitch.

CP is used to primarily finance energy efficiency measures. It may be used in the future for interim finance capital expenditures that will ultimately be refinanced with long-term debt. NYPA has not had any difficulty remarketing its EMCP or traditional CP.

SOLID LIQUIDITY
NYPA maintains healthy levels of internal and external liquidity, totaling \\$1.9 billion at the end of fiscal year 2014. Approximately \\$1.3 billion is internal cash reserves, providing 198 days operating cash for FYE2014. Including the available external bank facility, NYPA's days liquidity was sound at 210 days for FYE2014, in-line with 'AA' category wholesale systems.

NYPA's aggregate liquidity sources provide well in excess of Fitch's expected coverage metric of 1.25x over the maximum potential liquidity requirement.

In January 2015, NYPA expanded its RCA commitment to \\$600 million (from \\$550 million) and extended its expiration to Jan. 1, 2017.

SOUND LONG-TERM FINANCIAL AND OPERATIONAL CHARACTERISTICS

NYPA has a history of solid financial and operating performance. The authority maintains a strong balance sheet (58.5% equity capitalization for fiscal 2014), exceptionally low leverage (debt-to-funds available of 3.7x), healthy cash flow, and debt service coverage averaging more than 2.5x for the past five years (greater than 1.60x coverage of full obligations) - all of which exceed Fitch 'AA' median levels.

Net income for year-to-date fiscal 2015, however, is considerably below budget (\\$205 million annual projection revised to \\$80 million), due to lower than anticipated energy prices and less than budgeted hydrological conditions. Anticipated 2015 cost underruns will offset a portion of the net margin shortfall, and NYPA's debt service coverage should remain sound for the rating category, at more than 2.0x.

The authority is in the process of updating its financial plan for the next four-year period, which will address the budget shortfall. Fitch will be reviewing NYPA's financial plan in the coming month, to help resolve Fitch's Positive Rating Outlook on NYPA's long-term debt.

For additional information on NYPA's 'AA' long-term rating please see Fitch's last press release dated Aug, 14, 2014, available at www.fitchratings.com.