The Department of Water and Power of the City of Los Angeles issued $450 million in bonds to make improvements to the city’s power infrastructure.
The bonds were issued in two series. The 2023 Series B bonds consist of $100 million and mature between 2032 and 2053, yielding between 2.62% and 3.8%. The 2023 Series C bonds were issued at a variable rate. Subseries C-1 consists of $200 million and matures on July 1, 2057. Subseries C-2 consists of $150 million and matures on July 1, 2055.
The 2023 Series B bonds received a rating of Aa2 from Moody’s Investors Service, AA- from Fitch Ratings, and AA- from S&P Global Ratings. The 2023 Series C bonds received a rating of Aa2/VMIG 1 from Moody’s, AA-/F1+ from Fitch, and AA-/A-1+ from S&P.
The ratings reflect the department’s “very strong financial profile in the context of a large and diverse retail customer base, very strong revenue defensibility characteristics, increasing operating costs and a large capital plan,” according to Fitch.
The issuance comes as the utility redesigns its power supply to comply with state and local regulations that require higher levels of renewable energy as part of a requirement to maintain a carbon-free energy mix by 2035. More than 60% of the utility’s energy mix is already carbon-free.
The city recently completed the construction of the Red Cloud Wind Project, a renewable energy initiative that boosted the utility’s clean energy portfolio by 6%.
The issuance also comes amid internal turmoil at the utility, which is the subject of an ongoing federal corruption investigation. Last year, the utility’s former head was sentenced to six years in federal prison for accepting bribes in exchange for a contract.
The bonds will be backed by revenue from the utility, which generated $4.5 billion last year.
BofA Securities, Inc served as lead underwriter on the 2023 Series B bonds. Barclays Capital Inc served as lead underwriter on the 2023 Series C-1 bonds, and TD Securities (USA) LLC served as lead underwriter on the 2023 Series C-2 bonds.