LOS ANGELES — Moody's Investors Service placed $6.6 billion of power supply bonds issued by the California Department of Water Resources on review for possible upgrade.

The bonds are currently rated Aa3.

The review announced Dec. 20 is based on the rating agency's view that the DWR power credit profile has changed with further reduced operating risk as additional power contracts have expired.

The DWR's power bonds benefit from supportive cost recovery from the California Public Utilities Commission, which is evidenced by the continued approval of its annual rate fillings, analysts said.

The DWR sold $11.2 billion of power supply bonds in 2002 to pay for power purchases in the wake of an energy crisis that led to the bankruptcy of Pacific Gas & Electric Co. and the near bankruptcy of Southern California Edison in early 2001.

The DWR, created in 1956 and headquartered in Sacramento, is responsible for the state's management and regulation of water usage.

"The review for possible upgrade will focus on Moody's view of CA DWR Power's credit profile given the majority of its power related contracts have expired leaving minimal operating risk that is mitigated by held operating reserves sufficiently sized to cover the projected costs under the contracts," analysts said in a credit report released Dec. 20. "This has essentially eliminated CA DWR's operating risk, changing the credit profile until the bonds mature in 2022."

The review will focus on the key security features of the power bonds relative to comparable transactions including highly rated securitized debt obligations backed by utility cost recovery charges.

Moody's said it anticipates rating action with the next 90 days.

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