Credit rating agency KBRA assigns 'AA' rating and a stable outlook to the revenue bonds issued by the Los Angeles Department of Water and Power for their water system.
The Department of Water and Power of the City of Los Angeles (LADWP) Water System has retained a credit rating of AA with a stable outlook, as assigned and affirmed by Kroll Bond Rating Agency (KBRA) in July 2025.
KBRA, one of the major credit rating agencies, registered with the U.S. Securities and Exchange Commission as an NRSRO, conducted the rating analysis. Linda Vanderperre, Managing Director, served as the lead analyst for the LADWP rating.
The AA rating reflects LADWP Water System’s strong operational scale, financial policies, and governance. As the nation’s largest municipal utility, LADWP operates as a proprietary, self-supporting department of the City of Los Angeles. The Water System operates with full rate-setting authority governed by a five-member Board.
Revenues from Water System operations are separated into a dedicated Water Revenue Fund, distinct from the Power System. Water Revenue Bonds are secured by this Water Revenue Fund and are subject to a sum-sufficient rate covenant and internal Board policy targets.
Key credit considerations include the department's ability to maintain debt service coverage targets and successfully manage the $7.74 billion Water System Capital Plan through FY 2030. The implementation of this plan is expected to result in a decline in debt service coverage through 2030.
Other rating sensitivities include preserving adequate operating cash reserves, maintaining operational autonomy, and managing inverse condemnation claims related to the January 2025 Los Angeles wildfires and rising insurance premiums, which are expected to necessitate water rate increases.
KBRA is designated as a Designated Rating Organization by the Ontario Securities Commission for issuers of asset-backed securities. It is also recognized as a Qualified Rating Agency by Taiwan's Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider in the U.S.
The 2025 Series A and B Bonds are not backed by a debt service reserve fund. The Additional Bonds Test requires adjusted net income at least 1.25x the maximum annual debt service.
For business development inquiries, William Baneky and James Kissane, both Managing Directors and Senior Director respectively, can be contacted. Lina Santoro and Douglas Kilcommons, both Managing Directors, also contributed to the rating analysis.
The Department of Water and Power of the City of Los Angeles (LADWP) has received a long-term rating of AA from KBRA for its Water System Revenue Bonds, 2025 Series A and 2025 Series B. The Information Disclosure Form(s) for the credit rating can be found at the provided link.
[1] Kroll Bond Rating Agency, LADWP Water System Rating Action, July 2025, [Link to Disclosure Form] [2] Kroll Bond Rating Agency, LADWP Water System Rating Methodology, July 2025, [Link to Methodology]
- Kroll Bond Rating Agency (KBRA), a major credit rating agency designated as a Designated Rating Organization by the Ontario Securities Commission and recognized in the US and Taiwan, has assigned an AA long-term rating to The Department of Water and Power of the City of Los Angeles (LADWP) for its Water System Revenue Bonds, 2025 Series A and 2025 Series B.
- The AA rating is based on the LADWP Water System’s strong operational scale, financial policies, and governance, with revenues securely funded in a dedicated Water Revenue Fund.
- Key considerations for maintaining this rating include the department's ability to manage the $7.74 billion Water System Capital Plan through FY 2030, preserve adequate operating cash reserves, and manage inverse condemnation claims related to the January 2025 Los Angeles wildfires and rising insurance premiums.
- The LADWP, as the nation's largest municipal utility, operates as a self-supporting department of the City of Los Angeles and is subject to rate-setting authority governed by a five-member Board. Compliance with debt service coverage targets and successful implementation of these plans are crucial for maintaining the rating.
