J.P. Morgan Public Finance Transportation & Utility Investor … · 2019-07-25 · • Battery...
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J.P. Morgan Public Finance
Transportation & Utility Investor Forum
Long Island Power Authority &
Utility Debt Securitization Authority
Public Presentation
July 25, 2019
HELLO
Disclaimer
J.P. Morgan Transportation & Utility Investor Forum 2
This presentation is provided for general information purposes only and was prepared
from publicly available sources.
A copy will be made available on the Long Island Power Authority website and the
Municipal Securities Rulemaking Board’s EMMA website.
This presentation does not purport to include every item which may be of interest, nor
does it purport to present full and fair disclosure with respect to any of the Long Island
Power Authority or Utility Debt Securitization Authority bond programs within the
meaning of applicable securities laws.
This presentation does not constitute an offer or sell, or the solicitation of an offer to
buy, any security of the Long Island Power Authority or Utility Debt Securitization
Authority and was not prepared in connection with any such securities offering.
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NYISONew York Independent
System Operator
L O N G I S L A N D ’ S R E G I O N A L E L E C T R I C G R I D
ISO-NEIndependent System
Operator New England
PJMPennsylvania, Maryland,
New Jersey
(108 million MWh)(142 million MWh)
(787 million MWh)
Y49 / Y50 Cable
900MW net
Neptune Cable
660MW
Northport to Norwalk Cable
300MW
Cross Sound Cable
330MW
LIPA SERVICE TERRITORY
(21 million MWh)FAST FACTS
CUSTOMERS: 1,100,000 EMPLOYEES: 2,500
DISTRIBUTION SYSTEM
14,000 Miles
TRANSMISSION SYSTEM
1,400 Miles
REGIONAL CABLES
2,125MW
POWER PLANTS
32 Plants, 5,800MW
SUBSTATIONS
191
TRANSFORMERS
189,000
POLES
585,000
2019 OP. BUDGET
$3,525,334,000
(Including PSEG Long Island)
Northport and Port
Jefferson
Solar FarmsCombustion Turbines
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Public-Private Partnership
Business Model
LIPA contracts with PSEG
Long Island for
Management Services
(~55 employees)
(~2,500 employees)
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J.P. Morgan Transportation & Utility Investor
Forum
E N E R G Y P L AY E R S O N L O N G I S L A N D
Not-for-ProfitState Authority
Utility Contracted to Operate LIPA’s Grid
New York Independent System Operator
& Other Generators Other State and Federal Agencies
• Owns Electric Grid• Sets Energy Policy and
Electric Rates• Contracts for T&D
Services and Generation• Oversees PSEG Long
Island Operations• Funds LI Clean Energy
Programs • Exempt from Taxes• FEMA Grant Eligibility
• Day-to-Day Operations of T&D System
• Name and Face to Customers
• Storm Response• Infrastructure and IT
Improvements • Power Supply Planning• Performance Based
Management Fee
• Oversight of LIPA and PSEG Long Island
• Independent Rate Recommendations
• Consumer Complaint Investigations
• Management and Operations Audits
• Review Emergency Response Plans
• Dispatches Power Plants and Transmission on a Least Cost Basis
• Performs Planning Studies and Sets Energy Market Rules
• Own and Operate Power Plants
FERC
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LIPA acquires gridEstablished P3 structure
under Management
Services Agreement with
National Grid
5 Years Later…✓ Improved service
✓ Greater satisfaction
✓ Better gov’t relations
✓ Focused on value
2013
1998 2019
LIPA Reform ActReorganizes LIPA under
Operations Services
Agreement (OSA) with
PSEG Long Island
beginning January 2014
L I PA M I L E S T O N E S
1986
LIPA Act SignedLong Island Power Authority
(LIPA) created to acquire and
decommission the Shoreham
Nuclear Power Plant
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M O S T I M P R O V E D U T I L I T Y I N T H E N AT I O N
J.D. Power Customer Satisfaction – New York State and Large East Utilities
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Improving Customer Service
and Satisfaction
➢ PSEG Long Island has significantly improved customer service operating performance metrics
93
63.7
43.7
81.9
15
94.5 94.2 95.9
15
95.2 95.3 96.7
0
20
40
60
80
100
120
Average Speed of Answer(Seconds)
After-Call Residential Survey(Satisfaction Percentage)
After-Call Business Survey(Satisfaction Percentage)
Personal Contact Survey(Percentage)
Key Measures of Customer Service
2013 2018 2019 YTD
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S M A R T M E T E R S H AV E C O M E T O L O N G I S L A N D
➢ $200+ million multi-year smart meter roll-
out to all customers by the end of 2022
➢ Modernizing the customer experience
➢ Timely and accurate information
available to customers
➢ Rate choices that meet customer’s
needs and save them money
➢ Automatic outage detection
➢ Pro-active alerts and
communication
➢ New convenient payment options
➢ Improved power quality
➢ 250,000 meters to be installed in 2019
➢ Approximately 50% of sales are metered
through AMI devices
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R E C O R D I N V E S T M E N T I N
R E L I A B I L I T Y & R E S I L I E N C Y
Annual Infrastructure Investment in
Long Island Electric Grid
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Drones used for inspection of Electrical Facilities
11Hofstra Distinguished Lecture Series11
1 s t
Q u a r t i l e
R e l i a b i l i t y
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0.0 25.0 50.0 75.0 100.0 125.0 150.0 175.0 200.0 225.0 250.0 275.0 300.0 325.0 350.0 375.0 400.0 425.0
Appalachian Power Co
Central Maine Power Co
Ohio Power Co
DTE Electric Company
Duke Energy Carolinas, LLC
Pennsylvania Electric Co
Puget Sound Energy Inc
Entergy Louisiana LLC
West Penn Power Co
Consumers Energy Co
Central Hudson Gas & Elec Corp
New York State Elec & Gas Corp
Oncor Electric Delivery Company LLC
Duke Energy Progress - (NC)
National Grid (NIMO)
CenterPoint Energy
Jersey Central Power & Lt Co
Los Angeles Department of Water & Power
Massachusetts Electric Co
Public Service Co of NH (Eversource)
Ameren Illinois Company
Virginia Electric & Power Co
Georgia Power Co
Pacific Gas & Electric Co.
Alabama Power Co
Duquesne Light Co
Ohio Edison Co
Duke Energy Florida, LLC
Orange & Rockland Utils Inc
Southern California Edison Co
Union Electric Co - (MO)
Public Service Co of Colorado
Connecticut Light & Power Co (Eversource)
Arizona Public Service Co
PECO Energy Co
NSTAR Electric Company (Eversource)
Baltimore Gas & Electric Co
Northern States Power Co - Minnesota
PPL Electric Utilities Corp
LIPA / PSEG LI
San Diego Gas & Electric Co
Potomac Electric Power Co
Rochester Gas & Electric Corp
Florida Power & Light Co
Wisconsin Electric Power Co
Commonwealth Edison Co
Public Service Elec & Gas Co
Salt River Project
Consolidated Edison Co-NY Inc
2017 SAIDI PERFORMANCE (MINUTES)
1st Quartile
Median
3rd Quartile
Source Data: 2017 EIA 861 Report (Latest Available)
Panel Includes:
- NYS Utilities
- JD Power Large East Electric Companies
- National Electric Companies Serving > 1 Million Customers
SAIDI: System Average Interruption Duration Index
SAIFI: System AverageInterruption Frequency IndexCAIDI: Customer Average Interruption Duration Index
2019 Operations YTD – On Plan
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MAY YTD
Operations Services Agreement Metrics L/H OSA YE Target OSA YTD Target YTD Result OSA Forecast
OSHA Recordable Incidence Rate L 1.53 1.53 1.41
OSHA Says Away Rate (Severity) L 22.61 22.61 40.39
Reduce Motor Vehicle Accidents L -5.6% -5.6% -29.1%
JD Power Customer Satisfaction Survey (Residential) H 689 or 12th 689 or 12th 695
JD Power Customer Satisfaction Survey (Business) H 732 or 8th 732 or 8th Wave 1 - Aug
After Call Survey (Residential) H 91.5% 91.5% 95.2%
After Call Survey (Business) H 91.5% 91.5% 95.3%
Personal Contact Survey H 92.0% 92.0% 96.7%
Average Speed of Answer L 19 19 15
Customer Complaint Rate L 6.5 6.5 4.1
SAIFI (System Average Interruption Frequency Index) L 0.83 0.31 0.23
CAIDI (Customer Average Interruption Duration Index) L 85 85 74
SAIDI (System Average Interruption Duration Index) L 72.5 25.7 17.1
Customers Experiencing Multiple Sustained Outages (> 4) L 36,289 37,427 29,451
MAIFI (Momentary Average Interruption Frequency Index) L 3.29 1.06 0.89
AMI Installations H 250,000 104,167 135,062
Double Wood Poles L 9,626 11,084 11,075
First Call Resolution (FCR) H 82.8% 80.5% 81.0%
Utility 2.0 - OMS Integration H 1 1 1
JD Power Communications Effectiveness H 6.6% 6.6% 4.7%
Operating Budget ($M) L 606.4 252.4 240.0
Capital Budget ($M) L 670.8 250.1 187.9
Net Write-Offs Per $100 Billed Revenue L 0.61 0.61 0.55
Accounts Receivable > 90 Days L 18.0% 18.3% 18.0%
Low to Moderate Income (LMI) Program Participation H 27,000 25,849 26,849
Customer Self-Service H 40.5% 31.9% 38.0%
Energy Efficiency Annualized Energy Savings H 276,500 113,150 137,904
Notes: YTD Results Color YTD Results Color
- Color Coding in YTD Result column represents current s tatus versus YTD Plan. At or Better than YTD Plan On Track
- YE Forecast i s a subjective estimate of whether each metric i s expected to meet the YE Target. At Risk
- For Uti l i ty 2.0 - OMS Integration; 1 = Pass and 0 = Fa i l Worse than YTD Plan Wi l l Not Meet
Econ
omic
Gree
nSa
fe, R
eliab
lePe
ople
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R E C O R D F U N D I N G F O R C L E A N E N E R G Y
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➢ PSEG-LI won the 2019 Energy Star Partner of the Year Award for its efforts to help lower customer energy usage and reduce their carbon footprint
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M E E T I N G N E W
Y O R K ’ S C L E A N
E N E R G Y G O A L S
LARGE-SCALE BATTERIES
• Two utility-scale batteries are now operational on Long Island
• Battery technology stores and distributes clean energy when
renewables are not producing power
OFFSHORE WIND
• New York’s first offshore wind farm, operational in 2022,
will power 70,000 homes
• Delivers clean energy to an area on Long Island that
needs more power
SOLAR
• Home to New York’s three largest solar farms
• Over 47,000 customers with residential rooftop solar
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E N C O U R A G I N G E L E C T R I C V E H I C L E A D O P T I O N
• Residential charger rebates
• Smart charging discount
• Fast charging stations
• Reduces Long Island’s Carbon
Footprint
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F L AT C U S T O M E R B I L L S F O R O V E R A D E C A D E
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CLIMATE LEADERSHIP AND
COMMUNITY PROTECTION
ACT OF 2019 (CLCPA)
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HELLO
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70% X 203070 percent of electricity
generated in New York
to come from renewable
energy by 2030
9,000 MW X 2035New York aims to develop
9,000 MW of offshore
wind by 2035
6,000 MW X 2025Deploy 6,000 MW of
distributed solar by 2025
3,000 MW X 2030Energy storage target of 3,000
megawatts by 2030 to store
clean & renewable energy
NEW YORK’ S ELECTRI C POW ER GOALS
100% X 2040 | New York’s power grid will be 100% carbon neutral by 2040
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N E W Y O R K S TAT E E M I S S I O N G O A L S
➢ 60% reduction statewide
greenhouse gas emissions
by 2030
➢ Carbon neutral statewide
greenhouse gas emissions
by 2050
➢ Achieving targets will likely
require significant beneficial
electrification of
transportation and heating
NY Carbon Emissions by Sector
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Approx. 20 GW
Regional Market
O F F S H O R E W I N D I S T H E L A R G E S T
S O U R C E O F D O W N S TAT E C L E A N E N E R G Y
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L I PA / N Y S E R D A S T U D Y O F L O N G I S L A N D
G R I D F O R O F F S H O R E W I N D
Farragut
Substation
Holbrook
Substation
138kV 800MW
Canal Substation
Shoreham Substation
138kV 800MW
Ruland Road Substation
138kV 800MWBrookhaven
Substation
138kV 400MW
• N-1 and N-1-1 Study impacts down to the 69kV system• Deliverability Analysis• Short Circuit Analysis• Summer Peak and Light Load Conditions• Approximate costs of transmission upgrades and fast-start
resources to remedy impacts
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HELLO
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E U R O P E ’ S B O O M I N G O F F S H O R E M A R K E T
Source: Statista Dossier, Wind Europe, 2019
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HELLO
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• The cost of offshore wind continues to decline in Europe due to scale,
competition, and technology. That trend is now evident in the U.S. as
offshore wind scales
O F F S H O R E W I N D C O S T W I L L C O N T I N U E
T O D E C L I N E
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Property Tax Update
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L I PA P O W E R P L A N T S A M O N G H I G H E S T
TA X E D P R O P E R T Y I N A M E R I C A
Rank 2017 Taxes Building Name City, State Year Built
1 $82,093,239 Northport Power Station Northport, NY 1967
2 $75,568,292 General Motors Building New York, NY 1968
3 $66,504,858 Stuyvesant Town New York, NY 1945
5 $52,089,329 MetLife Building New York, NY 1963
11 $42,617,000 E.F. Barrett Island Park, NY 1956
15 $39,895,406 Empire State Building New York, NY 1931
21 $36,576,768 Exelon - Byron Nuclear Generating Station Byron, IL 1985
22 $35,642,819 Disneyland® Resort Anaheim, CA 1955
27 $32,661,000 Port Jefferson Power Plant Port Jefferson, NY 1958
28 $31,742,883 Sears/Willis Tower Chicago, IL 1973
31 $30,761,902 Mall Of America Bloomington, MN 1990
44 $23,000,000 Glenwood Landing Power Plant Glenwood Landing, NY 1967
58 $20,411,225 Borgata Hotel and Casino Atlantic City, NJ 2003
68 $19,230,044 The Waldorf Astoria New York, NY 1930
76 $17,912,974 Xcel Energy Monticello Nuclear Generating Plant Monticello, MN 1971
94 $16,365,273 Bellagio Hotel and Casino Las Vegas, NV 1998
Source: CommericalCafe
J.P. Morgan Transportation & Utility Investor Forum
Status of LIPA’s tax certiorari challenges:
Nassau County: E.F. Barrett and Glenwood
▪ Settlement discussions are continuing with Nassau
County
Town of Brookhaven & Village of Port Jefferson: Port
Jefferson Power Station
▪ Process in place to reduce annual tax payments
50% by 2027
Town of Huntington: Northport Power Station
▪ Trial anticipated to be completed in 2019
Property Tax Update
2019 Property Tax Report available
at www.lipower.org
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Financial Overview
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B O A R D P O L I C Y E S TA B L I S H E S
C L E A R F I N A N C I A L G O A L S
The LIPA Board Policy on Debt and Access to Capital Markets provides guidance for
LIPA’s path to a stronger financial position, with the goal of reducing long-term cost for
customers.
Key financial planning metrics:
➢ Implementing financial plans that lead to bond ratings of at least A2/A/A from
Moody’s, S&P, and Fitch over five years
➢ Achieving Fixed Obligation Coverage Ratio (measure of cash flow available to
pay current debt obligations) of 1.20x in 2016, 1.30x in 2017, 1.40x in 2018, and
1.45x in 2019 and beyond
➢ Generating sufficient cash flow to fund no more than 64% of capital expenditures
with debt
➢ Maintain Cash on hand of $100 million in Operating Fund and $150 million in
Rate Stabilization Fund
➢ Cash available credit of at least 120 days of operating expenses
J.P. Morgan Transportation & Utility Investor Forum
LIPA Cost Recovery Mechanisms Greatly
Reduce Financial VolatilityRate Components
Base Delivery Charges
Cost Recovery➢ Fuel and purchased power true up - Monthly
➢ Energy efficiency program true up - Annually
➢ Revenue and assessment tax true up - Annually
➢ Sales true up (Revenue decoupling) - Annually
➢ Debt, PILOTs, labor, regulation, taxes update - Annually
➢ Debt/Coverage, storms costs - Annually
UDSA Charge➢ Separate charge to repay UDSA bonds
➢ Revenues not subject to the LIPA Bond Resolution
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LIPA Cost Recovery Mechanisms Have
Delivered On or Better Than Planned Budgets
➢ LIPA has exceeded the financial targets in the Three-Year Rate Plan for 2016 to 2018
(in thousands) Budget Actual Results
2016 (42,031)$ (26,433)$ Better than Plan
2017 (12,140)$ 17,122$ Better than Plan
2018 376 22,662 Better than Plan
Change in Net Position
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F I X E D O B L I G AT I O N C O V E R A G E
Board financial policies require LIPA to budget for certain levels of Fixed Obligation
Coverage annually
LIPA has exceeded the coverage requirement in 2016, 2017, and 2018 and has budgeted
to achieve the required level in 2019
LIPA Only Coverage
1.20
1.30
1.40 1.45
1.26
1.33
1.49 1.45
1.00
1.10
1.20
1.30
1.40
1.50
2016 Actual 2017 Actual 2018 Actual 2019 Projected
Board Approved Actual & Projected
LIPA and UDSA Coverage
1.15
1.20
1.25 1.25 1.19 1.22
1.29 1.25
1.00
1.10
1.20
1.30
2016 Actual 2017 Actual 2018 Actual 2019 Projected
Board Approved Actual & Projected
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0
25
50
75
100
125
150
175
200
225
250
275
300
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
No
v-1
7
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
No
v-1
8
Dec
-18
Jan
-19
Feb
-19
Mar
-19
Ap
r-1
9
May
-19
Jun
-19
LIPA Cash and Available Credit
Days Cash and available credit Average 120 Days
➢ LIPA has exceeded its Board required 120 days cash on hand
LIPA Cash and Available Credit
Average: 198 Days
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Minimum: 120 Days
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Available Resources
J.P. Morgan Transportation & Utility Investor Forum 34
OPEB, $308
Rate Stabilization, $160
Unrestricted Cash and Cash
Equivalents, $220
LIPA Revenue Bonds, $218
$0
$100
$200
$300
$400
$500
$600
$700
$800
DSRF Mitigants 2019 LIPA Debt Service Obligations
(Mill
ions)
The above mitigants far exceed the
equivalent of maximum annual debt service
reserve requirement of $329 million
➢ Board authorized OPEB account: $308 million
➢ Board permits account to be available for debt service, if necessary
➢ Rate Stabilization Fund: $160 million (Covenant with credit providers
currently requires $150 million)
➢ Unrestricted cash of $220 million
➢ Approximately $582 million of remaining available credit capacity
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R E D U C I N G H I G H D E B T L E V E L S
70.00%
75.00%
80.00%
85.00%
90.00%
95.00%
100.00%
105.00%
110.00%
2016 2017 2018 2019 2020 2021 2022
LIPA Debt-to-Asset Ratio
➢ High leverage - acquisition of LILCO in 1998 financed 100% with debt
➢ LIPA’s plan is for debt-to-capital ratio to decline to the level of “A-rated”
public power utilities over 10 years (mid-60%)
➢ LIPA’s debt over the past 3 years has remained relatively stable
(increase < $250 million) while LIPA increased capital investments to improve reliability and resiliency of the grid by over $1.5 billion
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R AT I N G A G E N C Y V I E W
1
Rating
Outlook
A-
Negative
Baa1
Negative
A-
Negative
Rating
Outlook
A-
Stable
A3
Positive
A-
Positive
2013
2018
“The rating considers LIPA’s … improved financial, operating, and
customer satisfaction measures … LIPA's continued investment in
operational and systems improvements and the strong economic
profile of LIPA's service territory.” - Moody’s
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Financial Update
J.P. Morgan Transportation & Utility Investor Forum
R EFI N A N C I N G FOR SAVI N GS
➢ Issuance of up to $540 million in New Money bonds to finance electric system
infrastructure required to provide safe and reliable electric service to Long Island
2018 Actual 2019 Budget
Transmission and Distribution $356,526 $530,403
Information Technology $40,439 $35,236
FEMA-Storm Hardening $151,384 $153,609
Customer Operations & Other $42,209 $95,494
NMP2 $17,956 $19,461
Total 1 $608,514 $834,203
Percent of Capital Funded from Debt 62% 62%
1 Excludes portion of management fee funded through capital and LIPA capital expenditures
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Financial Update
J.P. Morgan Transportation & Utility Investor Forum
R EFI N A N C I N G FOR SAVI N GS
Refunding Dependent on Market Conditions
➢ LIPA monitors its debt for cost savings opportunities and is currently seeking
authorization to refund select series of bonds
➢ While tax-exempt advance refunding transactions are no longer permitted, LIPA is
considering structuring options that would maximize present value savings on any
refinancing
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