PHILADELPHIA – The City of Philadelphia announced today that Fitch Ratings has upgraded its rating on Philadelphia’s Gas Works Revenue Bonds to ‘A-’ from ‘BBB+’ and assigned a Stable outlook. For the first time in at least two decades, the Philadelphia Gas Works (PGW) bonds are now rated in the ‘A’ category by all three rating agencies. Moody’s Investors Service and Standard & Poor’s Global Ratings maintain Stable outlooks and ratings of ‘A3’ and ‘A’, respectively on PGW’s outstanding bonds.
In general, higher credit ratings can result in lower borrowing costs as investors view those securities as less risky.
Fitch cited PGW’s improved financial profile, diverse customer base, and strong resource management as key credit strengths. Fitch’s report specifically noted improved financial margins and lower leverage as vital factors for the upgrade. The release states Fitch “expects leverage to remain supportive of the ‘A-’ rating even through a fairly significant stress on revenues” as demonstrated through their internal stress test scenarios.
“The Fitch Ratings upgrade is a milestone for PGW and demonstrates our years-long commitment to enhancing natural gas service for Philadelphia’s homes and businesses while increasing our economic efficiency,” said Seth Shapiro, President and CEO, PGW. “As an energy provider and an economic driver of Philadelphia’s economy, we take seriously our responsibility to position PGW for long-term financial viability.”
In advance of PGW’s last bond sale, Fitch had previously upgraded PGW’s outlook to Positive in April 2020, signaling the progress made by PGW. This change was especially noteworthy given that it was a time of wholesale sector outlook and credit rating downgrades. PGW has been rated ‘BBB+’ by Fitch since April 2011.
“The ’A-’ rating is a major accomplishment and a testament to the hard work of PGW’s management team. The rating now outwardly reflects the strength of the credit,” said City Treasurer Jacqueline Dunn regarding the upgrade.
Since January 2016, the City has enacted refundings which have achieved net present value savings of approximately $54 million for PGW, and the City Treasurer’s Office and PGW continue to monitor opportunities to refund existing debt for additional savings