Bangkok--12 Nov--Standard & Poor's
Standard & Poor's Ratings Services has assigned its 'AA-' long-term rating to Los Angeles Department of Water and Power (LADWP), Calif.'s power system revenue bonds, series 2010D and 2010E. At the same time, Standard & Poor's affirmed its 'AA-' long-term and underlying ratings on the department's parity power system revenue bonds and its 'A-1+' short-term rating on the utility's $200 million power system revenue commercial paper notes. The outlook on the long-term ratings is stable.
"The department's large base of 1.4 million customers provides what we view as a diverse and stable revenue stream," said Standard & Poor's credit analyst Peter Murphy. "We believe other factors supporting the ratings include sound financial metrics after accounting for direct debt and off-balance-sheet financial commitments, financial flexibility from what we consider competitive retail electric rates, and strong liquidity," Mr. Murphy added.
We understand that the department is issuing the 2010D bonds to fund a variety of system capital improvements. Officials expect to sell the 2010D bonds as Build America Bonds.
LADWP has what we view as a large and diverse portfolio of more than 7,000 megawatts (MW) of dependable generation capacity, which is above the system's all-time peak demand of 6,100 MW (2006). The utility is forecasting a similar level of demand during the next five years.
The stable outlook reflects our assessment of base-rate adjustments and the variable cost pass-through mechanism's capacity to address cost pressures. However, LADWP projects that substantial additional debt and fixed contractual commitments needed to meet generation and system capital needs will continue to pose a challenge to maintaining historically strong financial margins at levels that we believe are only adequate for the rating.
RELATED CRITERIA AND RESEARCH
USPF Criteria: Electric Utility Ratings, June 15, 2007
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Peter V Murphy, New York (1) 212-438-2065
David Bodek, New York (1) 212-438-7969