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July 21, 2010

AMP Refinancing Approved, Credit Upgraded

At its meeting July 20, the Alameda City Council and the Alameda Public Financing Authority approved a refinancing of two Alameda Municipal Power revenue bond series. The refinancing is an outcome of a comprehensive, 6-month review of AMP’s financial planning goals, existing certificates of participation, and bond coverage requirements by AMP staff, the Public Utilities Board, and an independent financial advisor. The refinancing is expected to reduce AMP’s financial risk by converting existing variable interest-rate bonds to fixed interest rate.

City Council approval follows a recommendation forwarded by the Public Utilities Board, which took action Monday evening. Public Utilities Board President Greg Hamm stated, “Council’s affirmation of this component of AMP’s Ten-Year Financial Plan is extremely rewarding.”

Fitch Ratings has assigned an ‘A+’ rating and Stable Outlook to the $8,620,000 series 2010A and $23,115,000 series 2010B bonds. The rating represents an upgrade from the previous ‘A-’ rating with a Positive Outlook. An upgrade to ‘A+’ reflects a complete restructuring of AMP’s debt profile, a competitive power supply mix that already exceeds the State’s renewable portfolio standards, the recent rate adjustment, strong financial projections, and management’s adoption and implementation of financial policies that better reflect credit characteristics of the rating level. The upgrade also incorporates the sale of the telecom system and AMP’s more traditional public power business model as a result of the divestiture.

The Fitch rating rational cited the Board’s recent rate adjustment and longer-term rate philosophy as being one driver for their upgrade. The 3.7% increase is one of a series of minor rate adjustments, each expected to be less than 5%, which will be recommended to the Board over the next 4 years to address growing purchased power projections, escalating transmission costs, and needed capital improvements.

In 2000, AMP issued certificates of participation in two series to fund the expansion and improvement of the electric system, refinance then-outstanding debt, and partially defease certain power project financial obligations. Beginning in January, AMP staff, the Board, and an independent financial analyst initiated the review of AMP goals, certificates of participation, and bond coverage. Additionally, staff developed a series of assumptions and scenarios with the financial analyst to develop the Ten-Year Financial Plan used to balance revenue with expenses while maintaining adequate reserves.