Bonds related to KentuckyWired’s plans to build a fiber network in Kentucky via a public-private partnership received a downgrade—from stable to negative—from Moody's Investors Service. “The change in outlook to negative from stable reflects the further delays in project completion and the rising disagreement between the Project Co and the Commonwealth related to the amount of schedule and compensation relief due to the Project Co for certain material supervening events,” Moody’s wrote in a release detailing the downgrade.
“The resolution of these ongoing negotiations over the next few months will be the next key credit event,” the firm added.
“The Commonwealth is working diligently with its private sector partners in completing construction of the KentuckyWired project,” KentuckyWired said in a statement to FierceTelecom. “The project is very complex but progress is being made weekly, and the Commonwealth remains fully committed to the statewide scope of this broadband initiative.”
KentuckyWired communications director Randy Lutke added that the effort has so far deployed a total of 564 miles of fiber, after working in part to obtain access to roughly 80,000 utility poles owned by a total of 70 different entities—a time-consuming process he said KentuckyWired is close to completing. He added that KentuckyWired has also worked to address the “make-ready” engineering and construction process, which he said is a “necessary process that commonly takes longer than desired.”
In its release, Moody’s pointed to a possible delay in KentuckyWire’s longterm deployment plans. “The negative outlook incorporates the Commonwealth's approved adjusted longstop dates that are not sufficient to complete the project when compared to the Design-Builder's (DB) updated project completion dates per the recent technical advisor report,” Moody’s wrote. “We understand these dates are still under negotiation and the Commonwealth has yet to consider the numerous additional supervening events that will likely further delay the longstop date. The updated DB schedule also does not include acceleration measures and is mostly sequential with realistic time frames for certain activities that have proven troublesome to date.”
The firm added that its assessment may change if “the Commonwealth and Project Co reach an reasonable agreement” that extends the project's longstop date and provides for adequate compensation.
The Moody’s downgrade is just the latest issue facing Kentucky’s fiber-buildout efforts. As detailed in a recent Wired article, the Charles and David Koch-funded Taxpayers Protection Alliance has worked to slow KentuckyWired’s efforts. And Louisville, Kentucky, has been the site of a major pole attachment battle between Google Fiber and AT&T, among others. And just last month, the city of Lexington, Kentucky, made a deal with Indiana’s MetroNet to start building in January a FTTH network that will cost somewhere between $70 million and $100 million.
The Commonwealth of Kentucky contracted KentuckyWired to eventually build over 3,400 miles of high-speed, high-capacity fiber lines to its 120 counties. KentuckyWired is a public-private partnership with Macquarie Capital “and a team of market specialists.” Ledcor Group of Companies and Overland Contracting Inc., a Black & Veatch Company, are the effort’s “Design Build Team.” Two of KentuckyWired’s six fiber rings are scheduled to be completed in 2019, and a third is scheduled to be completed in 2020. The completion dates for the remaining three rings “will be announced as they become available,” according to KentuckyWired’s site.