A recent peer review for the water sector from credit ratings agency Fitch Ratings’ shows the sector is holding steady overall despite the delayed effects of inflation that have hit U.S. water utilities harder over the last year.
According to Fitch, water and sewer system operating costs have increased significantly while liquidity has fallen since the agency’s last peer review.
“Most water utilities fared well overall, though it is clear inflationary pressures have been more acute the last several months,” said Fitch Ratings Senior Director Audra Dickinson. “Operating revenue growth has leveled off following several years of more robust increases while liquidity declined.”
The erosion of liquidity has been steeper for wholesale providers with the cushion now down to 484 days (off a high of 713 in fiscal 2020). The median for retails systems is now at 562 days, which is down from last year but in line with longer-term historical performance.
Leverage ratios held steady for retail systems remaining at 3.4x for fiscal 2023. Leverage decreased for wholesale systems in fiscal 2023 to 6.7x, but that follows the notable increase in fiscal 2022 to 7.4x.
Fitch’s U.S. Water and Sewer: Peer Review is a point-in-time assessment of Fitch-rated public water and sewer utilities. It assists market participants in making their own comparisons among the recent financial performance of wholesale and retail water and sewer systems. It is accompanied by the 2024 Water and Sewer Fitch Analytical Comparative Tool (FACT), an interactive tool that provides enhanced trend analysis and peer comparison tables.
Fitch’s latest ‘U.S. Water and Sewer – Peer Review 2024’ is available at fitchratings.com.
Source: Fitch Ratings
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