Six years after it was the center of an economic and energy meltdown, California's latest public-sector energy financings are gaining improved reviews by Standard & Poor's Ratings Services (S&P) and Moody's Investors Service.

Southern California Public Power Authority's (SCPPA) $223 million bond refunding received an "A1" credit rating from Moody's with a stable outlook for its financing of the multi-utility Magnolia Power Plant operated by the City of Burbank municipal utility in Southern California. SCPPA is the state-chartered joint powers authority that is an infrastructure financing arm for a half-dozen public-sector utilities in the southern half of California, including the Los Angeles Department of Water and Power (LADWP), the nation's largest muni.

"Magnolia is an important generation resource providing fuel diversity to participants and is located close to the load, which enhances system reliability," Moody's said in making its rating and assessment on the bond refunding later this month. "SCPPA has a sound record of project management."

S&P looked at the Northern California Gas Authority's intention of selling about $757 million in bonds and rated them "A+," reflecting what S&P called the "outlook on Morgan Stanley as guarantor of the Morgan Stanley Capital Group Inc. (MSCG)." The ratings are tied to the long-term rating of Morgan Stanley (A+/Positive/A-1), S&P said.

"The A+ rating on the public-sector gas authority's bonds had been preliminary and subject to final documentation," S&P said, noting the outlook is positive for the Northern California public-sector gas utility financing arm. The gas authority is a special purpose vehicle established to issue bonds, S&P said, and the proceeds of this sale will fund the prepayment of 146 Bcf scheduled for delivery over 20 years. (SCPPA has helped fund similar prepayment of gas supplies in Southern California for its members' electric utilities.)

"The positive outlook on the series 2007A and series 2007B bonds reflected the outlook on Morgan Stanley under the gas purchase agreement," said S&P analyst Michael Messer.

In another forum, S&P raised the bond outlook for the state of California overall, changing the outlook on the state's general obligation debt to positive from stable based on what S&P called the state's "improved finances."

"Gov. Arnold Schwarzenegger's fiscal 2008 revised May budget proposal reflects a positive budgetary basis balance at fiscal year-end despite large general fund balance drawdown," S&P said. Analyst David Hitchcock said the rating agency "really doesn't expect any major surprise" given the fact that the state's economy has been doing so well.

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