Moody's Upgrades California Department of Water Resources to Aa1

Moody's Investors Service said it has assigned a Aa1 rating to the California Department of Water Resources' $567.86 million power supply system revenue bonds, Series 2016P and upgraded to Aa1 from Aa2 the rating on DWR's approximately $4.61 billion of pre-sale parity rated power supply revenue bonds outstanding.

The outlook is stable.

The upgrade reflects the removal of all material power operating risks leaving only limited administrative operations including general reporting, filing the annual rate case with the PUC and settling a couple of outstanding litigation cases that are expected to result in refunds to CADWR and passed through to customers like the other cases settled to date, Moody's said.

The Aa1 rating reflects its view of CA DWR (Power)'s very strong cost recovery framework supported by the irrevocable bond security protections offered by the state legislation, the legal covenants of the bond indenture, and the long history of California Public Utilities Commission (CPUC) compliance with the rate agreement that requires the CPUC to approve CA DWR (Power) rate filings to ensure that adequate funds are available to pay all operating and debt service costs.

The rating also acknowledges the annual true up mechanism should any collection shortfalls occur, the very healthy indenture required and cash funded reserves, and the large, diverse customer base.

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