Fitch to Upgrade L-T & S-T Ratings on NCPA CA's Hydro Proj Rfdg Revs Ser. 2008A&B

NEW YORK--()--On the effective date of Sept. 10, 2014, Fitch Ratings will upgrade the long-term rating to 'AA+' from 'AA' and the short-term rating to 'F1+' from 'F1' assigned to the Northern California Power Agency's (NCPA) Hydroelectric Project Number One revenue bonds consisting of $85,160,000 2008 refunding series A (variable rate demand bonds) and $3,165,000 ($2,105,000 currently outstanding) 2008 taxable refunding series B (taxable variable rate demand bonds). The Rating Outlook is Stable for the long-term rating. The rating action is in connection with: (i) the substitution of the irrevocable direct-pay letters of credit (LOCs) previously provided by Citibank, N.A. (rated 'A/F1', Stable Outlook) with substitute LOCs to be issued by Bank of Montreal (rated 'AA-/F1+', Stable Outlook); and (ii) the mandatory tender of the bonds, which will occur on Sept. 10, 2014.

KEY RATING DRIVERS

The long-term rating will continue to be determined using Fitch's dual-party pay criteria and will be based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'A+ ', Stable Outlook), and the rating assigned by Fitch to the Bank of Montreal (rated 'AA-', Stable Outlook), which will provide the substitute LOCs as support for the bonds. The short-term 'F1+' rating will be based solely on the substitute LOCs. For information about the underlying credit rating see press release dated May 13, 2014 available at 'www.fitchratings.com'.

Fitch's dual-party pay criteria consider the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a long-term rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation. Fitch has determined a low degree of correlation between Bank of Montreal and the obligor which results in a rating of 'AA+' for the bonds. If either the underlying bond rating or the bank rating were downgraded to 'A-' or lower, the dual-party pay criteria could no longer be applied, and the long term rating assigned to the bonds would then be adjusted to the higher of the bank rating and the underlying bond rating.

Pursuant to the substitute LOCs, the bank is obligated to make regularly scheduled payments of principal of and interest on the bonds in addition to payments due upon maturity, acceleration and redemption, as well as purchase price for tendered bonds. The ratings will expire upon the earliest of: (a) Sept. 9, 2019, the initial stated expiration date of the substitute LOCs, unless such date is extended; (b) conversion to other than the daily or weekly rate modes (series A), or to other than a weekly mode (series B); (c) any prior termination of the LOCs; and (d) defeasance of the bonds. The substitute LOCs provides full and sufficient coverage of principal plus an amount equal to 202 days of interest at a maximum rate of 12% based on a year of 365 days and purchase price for tendered bonds. The Remarketing Agent for the bonds is Citigroup Global Markets.

RATING SENSITIVITIES

As described above, the long-term rating is tied to the long-term rating assigned to the bonds and the long-term rating that Fitch maintains on the bank providing the substitute LOC. Changes to one or both of these ratings may affect the long-term rating assigned to the bonds.

The short-term rating is exclusively tied to the short-term rating that Fitch maintains on the bank providing the substitute LOC and will reflect all changes to that rating.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'U.S. Municipal Structured Finance Criteria'(Feb. 24, 2014);

--'Rating Guidelines for Letter of Credit-Supported Bonds' (May 14, 2014);

--'Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds' (March 8, 2013).

Applicable Criteria and Related Research:

U.S. Municipal Structured Finance Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736618

Rating Guidelines for Letter of Credit-Supported Bonds ¬タヤ Effective June 14, 2013 to June 2, 2014

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=710476

Dual-Party Pay Criteria for Long-Term Ratings on LOC-Supported U.S. Public Finance Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701572

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Joseph Staffa
Senior Director
+1-212-908-0829
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Mario Civico
Senior Director
+1-212-908-0796
or
Committee Chairperson
Linda Friedman
Senior Director
+1-212-908-0727
or
Media Relations
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Joseph Staffa
Senior Director
+1-212-908-0829
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Mario Civico
Senior Director
+1-212-908-0796
or
Committee Chairperson
Linda Friedman
Senior Director
+1-212-908-0727
or
Media Relations
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com