S&P Global Ratings lowered its long-term rating to "AA-" from "AA" on Central Alabama Water's (CAW) fiscal mismanagement, which the board attributes to the former Birmingham Water Works Board (BWWB).
"While this action is serious, it does not come as a surprise to the current management team,” said Jeffrey F. Thompson, CEO of Central Alabama Water said in a statement. “We were aware of S&P Global’s concerns, had similar concerns of our own and are working to address them.”
Members of the new board have been open about the challenges left behind from the previous board, with the release today citing the fact that BWWB exceeded its operating expense budget for multiple years while allowing unbilled and lost water to grow to high levels.
They note that these concerns led the legislature to pass SB330, which became Act No. 2025-297, dissolving the previous organization and creating Central Alabama Water.
"The rating change reflects the system’s weakening liquidity position and aging assets, coupled with a substantial reorganization of management," S&P wrote in its statement announcing the change.
"The CreditWatch placement reflects an at least one-in-two chance that we could lower the rating during the next 90 days following operational and financial updates from the water system," S&P says, noting that it is requesting additional information from the utility.
Thompson and the new board have already been working on a budget that includes changes such as cutting contracts that weren't directly benefiting customers, reorganizing staff, and reevaluating the scope and timeline for the Lake Purdy Dam project.
“We anticipate the revised budgets to provide a path forward to ensure the long-term financial stability of CAW,” Thompson said. “We have already taken steps to improve our financial position and will continue to do what is necessary to create a world-class water utility that our customers can trust.”
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