LOS ANGELES — The Los Angeles Department of Water and Power expects to save $1.9 million when it refunds $271 million in power system revenue bonds on Sept. 15 and 16, according to a spokesman.
The 2015 Series B power system revenue bond refunding will roll over the $300 million of maturing power system 2012C 3-year bonds for another three years, said Joe Ramallo, an LADWP spokesman.
"The rollover refinancing will avoid higher interest costs and save approximately $1.9 million in present value terms for the next three years relative to a long-term fixed-rate financing," Ramallo said.
The bonds will be sold in a single series with a maturity date of Dec. 1, 2018 and a Nov. 1, 2018 par call date. The retail order date is Sept. 15 with institutional pricing to follow the next day.
The finance team includes Citi as senior manager, Public Resources Advisory Group as financial advisor, Orrick, Herrington & Sutcliffe as bond counsel and Nixon Peabody as underwriter's counsel.
The bonds received ratings of Aa3 with a positive outlook from Moody's Investors Service and AA-minus with a stable outlook from both Fitch Ratings and Standard & Poor's.
"We view the system's large customer base and sound financial metrics as key credit strengths," Standard & Poor's credit analyst David Bodek said.
LADWP, the largest municipal utility in the U.S., provides water to 3 million people and power to 1.5 million customers in Los Angeles.
"We have successfully navigated the financial crisis and our financial metrics our strong," said Jeff Peltola, the department's chief financial officer, during an online investor presentation. "The department has taken a conservative approach relative to debt issuance; and maintained low rates giving it exceptional operational flexibility."
The department has an $8 billion capital improvement plan for the next 20 years to meet environmental mandates by moving toward more environmentally-friendly methods of generating power like windmills and solar and away from using coal. Of that figure, the department plans to finance $4.7 billion by issuing debt and plans to fund 41%, or $3.3 billion with cash, according to its net road show presentation.
LADWP has $8.15 billion in outstanding bond debt and an additional $2.33 billion in take or pay obligations to jointly-owned generation and transmission facilities, but $754 million of the latter is prepaid, according to the presentation. Roughly 80% of that debt is fixed-rate and the department has no interest rate swaps or auction rate notes, said Mario Ignacio, LADWP's chief accounting employee and assistant auditor during the net road show.
The Department plans to issue new money bonds for both systems around second quarter 2016, but an amount has not yet been determined, Ramallo said.
