Pasadena Water and Power Revenue Bonds Upgraded to ‘AAA’ Rating

Pasadena Water and Power’s approximately $62.7 million water revenue refunding bonds have been upgraded to “AAA,” the agency’s highest rating, the City department announced.

“This rating reaffirms confidence in PWP’s budget, planning, and resource management,” PWP Interim General Manager Jeffrey Kightlinger said. “Fitch cited PWP’s favorable service area, very low operating cost burden, and long-term capital projects that are well-scoped and defined in the Water System and Resources Plan (WSRP) as justifications for the ‘AAA’ rating.”

The WSRP is Pasadena’s roadmap for long-term capital and water resource planning that addresses its aging infrastructure, future water demands, existing water resources, and opportunities for new water supplies.

The upgrade released on Oct. 26 said Fitch assessed PWP’s water system’s Standalone Credit Profile (SCP) at “aaa.” The SCP represents the credit profile of the system on a stand-alone basis irrespective of its relationship with the City of Pasadena and the City’s credit quality.

The rating outlook was deemed “stable.”

“The upgrade of the bond rating to ‘AAA’ and SCP to ‘aaa’ reflects Fitch’s expectation that the system’s leverage, measured as net adjusted debt to funds available for debt service (FADS), will remain below 5.0x in the upcoming years,” Fitch’s statement said. “Historically, the system’s leverage is very stable and has not exceeded 3.6x over the last five fiscal years. The upcoming years are likely to reflect the peak of the system’s capital improvement program (CIP) and inclusive of additional debt to support higher capex, leverage is still expected to remain exceptionally low.”

PWP provides retail water services to a population of approximately 162,000 through 38,000 service connections in the city and in the communities of Altadena, East Pasadena, and portions of unincorporated Los Angeles county, with about 80 percent of the customer base residing within the city limits.

Fitch described Pasadena as a mature community covering 23 square miles in Los Angeles County, 10 miles northeast of downtown Los Angeles.

“The built-out nature of the service area limits growth pressure from the standpoint of water supply demand and new infrastructure investment,” Fitch said.