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City Manager's Office

Date: Aug. 8, 2007
Contact: Jeff Hood (209) 333-6801;
Electric Utility Director George Morrow, (209) 333-6762.
Subject: Fitch upgrades Lodi Electric Utility


Fitch upgrades Lodi Electric Utility debt, raises outlook to “positive”

LODI – Citing “many positive developments,” Fitch Ratings on Wednesday boosted the Lodi Electric Utility’s credit rating one level to BBB and its financial outlook to “positive.”

Fitch’s upgrade comes one week after Standard & Poor’s upgraded the utility’s outlook to “stable,” while maintaining a BBB+ rating. Fitch had assigned Lodi Electric a BBB- rating before Wednesday in addition to a “negative” outlook.

“We’ve locked in energy supplies and we’ve reduced our risk,” Lodi City Manager Blair King said. “We’re increasing our cash, which insulates the utility from further risk, protecting us against fluctuations in the deregulated, volatile energy market in which we’re in.”

Fitch pointed out several reasons Lodi Electric deserved the ratings increase:

  • The City Council’s adoption of an automatic monthly energy cost adjustment that reflects power supply costs.
  • 70 percent of the utility’s power needs over the next few years is under contract.
  • The utility has a $3 million line of credit and more than $5 million of available cash, up from $3.6 million a year ago.
  • The City Council’s adoption of a $12.9 million cash reserve target that is expected to be reached by 2010.
  • The downward trend in the percentage of utility revenue transferred to the city’s general fund.

A higher rating has the potential to reduce the utility’s borrowing costs as well increase the number of energy suppliers willing to sell electricity to Lodi.

“This is the culmination of a lot of hard work by the folks at the electric utility and the city and we look forward to continuing the progress that we’ve made,” Electric Utility Director George Morrow said.

Fitch analysts said Lodi’s commitment to the utility’s new policies and practices could lead to further upgrades. In the current fiscal year, Lodi Electric Utility’s budget calls for repayment of nearly $9 million in principal and interest on $78.6 million in certificates of participation notes.

To read Standard & Poor's report, click here.


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