Fitch Rts California Dept of Wtr Resources $150MM Pwr Revs Ser 2008I-1 'AA+/F1+', 2008I-2 'AA/F1+'

Business Wire, April 1, 2008

NEW YORK -- Fitch Ratings has assigned an 'AA /F1 ' rating to the California Department of Water Resources (DWR) $50,000,000 power supply revenue bonds, subseries 2008I-1, and a rating of 'AA/F1 ' to DWR's $100,000,000 power supply revenue bonds, subseries 2008I-2. The 'AA ' long-term rating to the subseries I-1 bonds is based jointly on the letter of credit (LOC) provided by Allied Irish Banks, p.l.c. (currently rated 'AA-/F1 ') and the 'A ' rating assigned to DWR. The 'AA' long-term rating to the subseries I-2 bonds is based jointly on the LOC provided by Landesbank Hessen-Thuringen Girozentrale (currently rated 'A /F1 ') and DWR's 'A ' rating. The 'F1 ' short-term ratings for both subseries are based solely on the LOCs.

The long-term ratings on the subseries I-1 and I-2 are based on Fitch's methodology that considers the likelihood of the failure of both a municipal issuer and a bank LOC provider. The methodology results in a rating that is two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the municipality have a low degree of correlation. Note that because both entities must be rated 'A' or higher for this methodology to be applied, if DWR or one of the banks listed above were downgraded to 'A-' or lower, the long-term rating assigned to the bonds would drop to that of the higher rated entity.

Pursuant to the LOCs, the banks are obligated to make payments of (1) principal of and interest on the bonds when due and (2) purchase price for tendered bonds. The ratings will expire on the earliest of: April 1, 2011, the stated expiration date of the LOCs, unless such date is extended; any prior termination of the LOCs; and defeasance of the bonds. The LOCs provide full coverage of principal plus an amount equal to 40 days of interest at a maximum rate of 15%, based on a 365-day year. J.P. Morgan Securities Inc. is the underwriter and remarketing agent for the bonds. The bonds are expected to be delivered April 2, 2008.

The bonds initially bear interest in the daily rate mode but may be converted to a weekly, flexible, term, auction or fixed interest rate mode. While the bonds bear interest in the daily and weekly rate modes, interest is payable on the first business day of each month, commencing May 1, 2008. Holders of bonds bearing interest at a daily or weekly rate mode may tender their bonds for purchase with prior notice. The bonds of each series are subject to mandatory tender: (i) on interest mode conversion dates (other than conversions between daily and weekly modes); (ii) on the business day following the end of each flexible or term interest rate period; (iii) upon the expiration or termination of the LOC relating to a subseries of bonds; (iv) upon the substitution of the LOC relating to a subseries of bonds if the substitution will cause a reduction or withdrawal of the rating assigned to such bonds. The bonds are also subject to optional and mandatory sinking fund redemption.

Bond proceeds will be used by DWR to refund outstanding bonds.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.