Fitch Ratings has assigned an “AA-“ rating to bonds issued by the Los Angeles Department of Water and Power. The ratings agency said the “AA-“ rating reflects LADWP's very strong financial profile.
The Rating Outlook is Stable.
The following bonds were rated at “AA-“:
- Approximately $100 million power system revenue bonds, series 2023B;
- Approximately $200 million power system variable-rate demand revenue bonds, series 2023C-1 (underlying rating);
- Approximately $150 million power system variable rate demand revenue bonds, series 2023C-2 (underlying rating).
In addition, Fitch has assigned an “AA-“ bank bond rating to the series 2023C-1 and 2023C-2 bonds, in the event of a failed remarketing and the bonds are held by the financial institution providing the liquidity facility. The bank bond rating is assigned to the 2023C-1 and 2023C-2 bonds but will only become applicable if the bonds cannot be remarketed and are purchased by the bank providing the liquidity facility.
Proceeds of the series 2023B and 2023C bonds will be used to fund certain improvements to the power system and pay costs of issuance.
In addition, Fitch has affirmed the following LADWP bonds at “AA-“:
- $9.7 billion in fixed-rate power system revenue bonds;
- $791.7 million in variable-rate demand power system revenue bonds series 2001B, 2002A, 2021A (long-term and bank bond ratings)
The “AA-“ rating “reflects LADWP's very strong financial profile in the context of a large and diverse retail customer base, very strong revenue defensibility characteristics, increasing operating costs and a large capital plan,” Fitch said.
It noted that LADWP is in the process of redesigning its overall power supply portfolio to comply with state and local requirements to increase renewable energy resources and supply 100% carbon-free energy to its retail customers by 2035.
The rating analysis does not incorporate full potential costs related to the power supply conversion since the utility's strategic plan to reach the target and the total costs are not yet fully identified.
A final plan is expected in 2023, but additional costs in the capital plan are not expected to be materially incurred above the current five-year capital improvements program.
