LA Wildfires and LA DWOP
Although the number of acres burned, and structures damaged from CA wildfires has decreased from 2020 when 4.3 mlln acres burned and resulted in approximately 20 billion dollars of damage. The more recent fires are closer to populated areas and have resulted in much more significant monetary losses, estimates are over 200 blln dollars.
As of now, LA DWOP’s equipment has not been deemed responsible for the ignition of any of the fires. Estimates range between 100 and 200 mlln dollars to fix their damaged infrastructure, which they have ample insurance to cover. In addition, LA DWOP provides electricity and water to 4 mlln people and is the largest municipal utility in the US. State and Federal aid will be available to help them operate. Finally, the bonds are secured by rate covenants that allow LA DWOP to raise rates to cover additional expenses.
With heavy rains expected to fall this weekend, we suspect that spreads and yields on this credit have widened too much.
