Fitch Confirms $173MM California DWR Power Supply Revs Converted to Fixed Rate at 'A+'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings confirms the underlying long-term rating of 'A+', with a Positive Outlook, for the California Department of Water Resources' (DWR) power supply revenue bonds, series 2005G-4 ($98 million) and series 2005G-11 ($75 million) upon their conversion to a fixed-rate mode effective today (the 'conversion date'). As of the conversion date, the following has occurred: (i) the bonds have been converted from a variable rate to a fixed rate mode; (ii) the liquidity facilities (as provided by Morgan Stanley for the Series G-4s; and KBC for the Series G-11s) supporting the bonds have expired as per their scheduled expiration date of Dec. 1, 2008; and (iii) the FSA-provided bond insurance supporting the 2005G-4s and G-11 will be terminated and cancelled. Consequently, the enhanced credit ratings currently outstanding for these bonds will be withdrawn as of the conversion date. Interest on the converted bonds will be paid semiannually and the bonds will be subject to optional and mandatory redemption.

The bonds are secured by DWR's bond charge revenues imposed by the California Public Utilities Commission (CPUC) on all customers served by the three investor-owned utilities (IOUs) in California: Pacific Gas & Electric Company (PG&E, Fitch IDR of 'BBB+'); San Diego Gas & Electric Company (SDG&E, IDR of 'A+'); and the Southern California Edison Company (SCE, IDR of 'A-'). The bonds are separately secured from any other obligations of DWR. The bonds are not obligations of the State of California (the state).

The Department of Water Resources was established in 1956 as a department of the state of California. DWR entered the electric power business in 2001, when soaring energy prices outpaced capped regulated rates charged by the state's investor owned utilities, threatening the IOUs' financial viability and ability to deliver power. DWR began selling power to the IOUs' customers at that time via power purchase agreements which expire in 2015.

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