Fitch Rates Pasadena Water & Power's $65MM Electric Revs 'AA-'; Outlook Stable

NEW YORK--(Business Wire)--Fitch Ratings assigns an 'AA-' rating to Pasadena Water and
Power's (PWP) $65 million City of Pasadena, California electric
revenue bonds series 2008. Fitch also affirms its 'AA-' rating on
PWP's $121.7 million of outstanding electric revenue bonds. The Rating
Outlook is stable. The bonds are secured by a net revenue pledge of
PWP's electric system. The bonds will sell competitively and are
expected to price on Jan. 28, 2008.

The 'AA-' rating for PWP reflects a solid financial position,
characterized by strong liquidity, a fairly diverse power resource
mix, and competitive rates. Also supporting the rating is a mature
service territory with moderate growth (1%) in an affluent community.
PWP's financial metrics are in line with comparable utilities in the
'AA-' rating category.

Liquidity is substantial with nearly $201 million in cash
reserves, the majority of which comes from the Stranded Investment
Reserve Fund (SIR $145 million), established in 1997, to address
electric industry competition. Fitch views the SIR and the flexibility
it provides as a credit strength and a key factor in Fitch's 'AA-'
rating.

The ratings also take into account a return to lower, more stable
transfer payments to the city of Pasadena in 2007 and 2008, resulting
in a stronger free cash flow for the utility. In addition to its
current cash reserves, Fitch notes that continuation of a moderate
level of transfer payments and future rate increases (as needed)
support PWP's strategy to fund its five-year, $367 million capital
improvement plan. The capital improvement plan will primarily fund
distribution upgrades. As a result, PWP's 77% equity-to-capitalization
will moderately decline given PWP's plan to fund its capital plan with
65% debt and 35% equity.

The utility's power requirements in fiscal 2007 was met with
fairly diverse mix of reserves composed of coal (54%), natural gas
(9%) nuclear (5%), renewable generation (10%) and market purchases
(23%). The low-cost coal supply contributes to competitive electric
rates in a California market dependent on natural gas pricing.
However, compliance with future restrictions on CO2 emissions could
affect PWP's future financial and competitive position.

Pasadena Water and Power (PWP) is a municipal utility system that
includes separate electric and water systems overseen by one
management team. Total PWP revenues are approximately $207.5 million
contributed from the electric system (81%) and the water system (19%).
PWP's electric system is integrated with generation, distribution, and
transmission assets, of which nearly 67.5% of its power comes from
long-term take-or-pay contracts. PWP serves 62,799 electricity
customers.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Yvettte Dennis, 212-908-0668
Lina Santoro, 212-908-0522
or
Media Relations:
Brian Bertsch, 212-908-0549

Copyright Business Wire 2008