06-03-11 BPU RPT 13 - Laserfiche WebLink

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W A I E R I E N E R G Y L I F E RIVERSIDE PUBLIC UTILITIES Board Memorandum. P U B L I C U T I L I T I E S BOARD OF PUBLIC UTILITIES DATE: June 3, 2011 ITEM NO: 13 SUBJECT: RESULTS OF ELECTRIC AND WATER BOND FINANCINGS AND CREDIT RATING REPORTS ISSUE: That the Board of Public Utilities receive this update on the financing results of the Utilities' bond issuances. RECOMMENDATION: That the Board of Public Utillties receive and file this report. BACKGROUND: On March 4, 2011, the Board of Public Utilities approved a financing plan relating to four series of variable rate demand obligations. Three of the series were electric bonds. Two of those series(2008A and 2008C Electric Bonds) were unchanged, with the associated line of credit with Bank of America/Merrill Lynch extended until April 29, 2014. The third series (originally 2008B Electric Bonds, principal outstanding of $55.45 million) was a direct purchase by Wells Fargo (now 2011A Electric Bonds). The electric financing plan did not require the preparation or issuance of an Official Statement, nor did the electric utility need to seek an updated credit rating. The fourth series (2008A Water Bonds) was refunded as the 2011A Water Bonds in a SIFMA Index Mode. This required the preparation and issuance of an Official Statement and due to the short-term nature of the bonds, required that the Utility seek a short-term rating. The Water Utility presented its credit fundamentals to Standard and Poor's (S&P), Fitch Ratings (Fitch) and Moody's on April 18-19, 2011. Credit Ratings Riverside Public Utilities (RPU) maintains some of the highest municipal utility bond ratings in the State of California. The Electric Utility bonds maintain an AA- rating from both S&P and Fitch. Prior to issuing a credit rating, the agencies do a complete review of the entity. This includes their assessment of management's integrity, and how the entity compares to other similarly rated entities in the same industry. The financial review includes debt service coverage, financial projections, customer composition, rate competitiveness, leverage ratios, liquidity levels, revenue composition, capital programs and funding metrics, past performance, and annual financial reports Rating agencies view positively,the local control of a municipal utility,with the efficient rate making authority of the local regulatory body. A key component of the utility's rating relates to the Board of Public Utility's and the City Council's demonstrated willingness to raise rates. Raising constituents' rates is always difficult. Riverside's history of approved rate increases to ensure cost recovery of providing safe and reliable electric and water service that meets or exceeds all state and federal guidelines, was a key rating consideration. The Water Utility's long term credit ratings were AA+IAA+IAa2 from S&P, Fitch and Moody's respectively. After a full credit review and confirmation by the respective credit committees Fitch affirmed the water Utility's long-term AA+ rating and issued it highest short-term rating (F1+)for the 2011 A water bonds. Moody's also affirmed the water Utility's long-term Aa2 rating, and also issued its highest short-term rating (MIG1)for the 2011 A water bonds.