OREANDA-NEWS. Fitch Ratings has affirmed the 'AA-' ratings on the following outstanding Southern California Public Power Authority (SCPPA), CA's bonds:

--\$142.9 million (Milford Wind Corridor Phase II Project) revenue bonds series 2011-1;
--\$125.5 million (Linden Wind Energy Project) revenue bonds series 2010A and 2010B;
--\$446.8 million (Windy Point/Windy Flats Project) revenue bonds series 2010-1).

The Rating Outlook is Stable.

SECURITY

The SCPPA bonds are payable solely from revenues received from the two members participating in each project - Los Angeles Department of Water and Power (LADWP) and Glendale Water & Power (GWP; together the 'members'). Pursuant to the SCPPA power supply agreements for each of the three wind projects, the members are unconditionally obligated for their respective share of the project costs (including debt service). Step-up provisions require LADWP to pay the full project costs in the event of non-payment by GWP.

KEY RATING DRIVERS

RENEWABLE WIND ENERGY PROJECTS: The three projects are operating wind projects located in Utah and Washington which provide renewable energy to LADWP and are essential to meeting California's renewable portfolio standard.

UNCONDITIONAL TAKE-OR-PAY AGREEMENTS: Bondholders are secured by absolute and unconditional 'take-or-pay' power supply agreements that extend for the life of the bonds with two members - LADWP (power system revenue bonds rated 'AA-' by Fitch Ratings) and GWP (rated 'A+').

STEP-UP PROVISIONS OBLIGATE LADWP: The agreements provide additional support through the inclusion of step-up provisions (20% for Milford II, and 100% for Linden and Windy Point) that require LADWP to pay full projects costs in the event of a payment default by GWP. LADWP's obligation to pay is on parity with other similar off-balance sheet obligations and its own outstanding power revenue bonds.

RATINGS DRIVEN BY LADWP RATING: The project ratings are driven by the rating and underlying credit quality of LADWP. LADWP's credit characteristics include a strong and diverse service area with over 1.5 million customers, favorable rate adjustments that mitigate concerns over a lengthy base rate process, strong financial margins, high debt levels and large ongoing capital needs.

RATING SENSITIVITIES

CHANGES IN LADWP CREDIT QUALITY: Ratings on the Southern California Public Power Authority (SCPPA) wind project bonds are based on the credit quality of the Los Angeles Department of Water and Power's (LADWP) power system. Changes to the credit rating of LADWP's power system revenue bonds would result in a similar rating change on the SCPPA wind projects.

CREDIT PROFILE

SCPPA is a joint-action agency that owns and operates electric generation, transmission, and physical gas assets on behalf of its 14 members, all of whom are municipal electric utilities in southern California. All of SCPPA's projects are financed and secured on an individual project basis. There is no other source of revenues for each of the SCPPA projects than the payments made directly from those members that participate in each specific project.

SLIM FINANCIAL MARGINS TYPICAL FOR JOINT ACTION PROJECTS

As a joint-action agency, SCPPA and its associated projects report slim financial margins, as payments from members are meant to only cover associated costs. Debt service coverage is typically slightly above 1.0x, which is the case for each of the three wind projects.

MILFORD II WIND ENERGY PROJECT

The Milford II wind energy project is a 102 megawatts (MW) nameplate capacity wind generation project located near Milford, Utah. SCPPA used bond funds to prepay for a fixed amount of energy from the project to be delivered over 20 years between 2011 and 2031. The project began commercial operation on May 2, 2011. The phase II project is an expansion of the Milford Phase I project (a 203.5 MW project), the output of which is also dedicated to LADWP and GWP through a separate prepaid arrangement.

The project's transmission access directly into California makes the energy eligible as an 'in-state' resource under California's renewable portfolio standard requirement. The two phases of the Milford project share transmission capacity in an 88-mile transmission line that connects into the Intermountain Power Project (IPP) switchyard, a facility in which LADWP owns transmission capacity rights via its IPP agreements. These agreements currently expire on June 15, 2027 (which is prior to the final maturity on these bonds on July 1 2031). Although SCPPA is working to extend these rights, its payment obligations to bondholders is not dependent on its ability to deliver the energy.

The capacity factor of the project was 21.7% and 18.4% in fiscals 2014 and 2013, respectively, and has generally been below initial estimates (25.9%) since commercial operation. However, annual energy output has not fallen below the minimum amounts required.

LINDEN WIND ENERGY PROJECT

The Linden wind energy project is a 50 MW project located in Klickitat County, Washington. The project was developed by Northwest Wind Partners. The project was purchased on Sept. 14, 2010 and is owned by SCPPA and operated by EnXco. Transmission is provided via long-term contracts with Klickitat Public Utility District, WA and the Bonneville Power Administration.

Since the project was purchased prior to June 1, 2010, it is a grandfathered project under California's renewable portfolio standard. This designation allows the energy from a grandfathered project to reduce the amount of total renewable energy needed to be in compliance with the three compliance categories (often referred to as 'buckets').

Project performance has been good since commercial operation began on June 30, 2010, with capacity factors of 34.1% and 28.3% in fiscals 2014 and 2013, respectively.

WINDY POINT/WINDY FLATS POWER PROJECT

The Windy Point/Windy Flats Power Project is one of the largest wind farms in the United States, spanning 26 miles along the Columbia River ridgeline in Washington. The 262.2 MW project consists of 114 wind turbines that have been fully operational since March 2010. The project was developed by Windy Flats Partners, LLC (an affiliate of the Cannon Power Group). Cannon Power Group is the project operator as well. Transmission is provided via long-term contracts with Klickitat Public Utility District, WA and the Bonneville Power Administration.

Similar to the Linden project, the energy is grandfathered under California's renewable portfolio standard. Operations have been good with capacity factors of 29.7% and 30.0% in fiscals 2014 and 2013, respectively.

LAYOFF AGREEMENTS BETWEEN GWP AND LADWP

SCPPA has sold its rights to prepaid energy from Milford II under power sales agreements to LADWP (95.098%) and GWP (4.902%). SCPPA has sold the output of the Linden project to LADWP (90%) and GWP (10%). The output of Windy Point is contracted to LADWP (92.37%) and GWP (7.63%) as well. GWP has contracted the sale of its share from the three projects to LADWP for the term of each project sales agreements. The result is that LADWP pays 100% of project costs, including debt service.

SECURITY INTEREST IN THE EVENT OF NON-PERFORMANCE

SCPPA has a perfected first lien and priority security interest in the Milford II and Windy Point/Windy Flat facilities under the terms of the project purchase agreements that would allow SCPPA to take the assets in the event the seller is unable to meet its obligations under the power purchase agreement. SCPPA also has early buy-out options at certain dates for each of the three projects but the purchase would not change LADWP or GWP's obligations to continue paying debt service on the bonds. The Linden project is already owned by SCPPA.

LADWP CREDIT QUALITY IS STRONG

LADWP is the largest city-owned municipal utility in the United States with 1.5 million electric customers. For more information on Fitch's rating for LADWP's power system, see press release 'Fitch Rates Los Angeles, CA Power Rev Bonds 'AA-'; Outlook Stable' dated Feb. 24,2015 and report 'Los Angeles Department of Water and Power, CA Power System' dated Feb. 19, 2014.