(PORTLAND, OR) -- The three major credit rating agencies
affirmed the ratings on BPA-backed debt last week, paving the way for Energy
Northwest, with BPA’s support and encouragement, to issue refinancing bonds
that will result in substantial savings for the benefit of BPA’s ratepayers.
Energy Northwest will refinance approximately $321 million
of outstanding debt associated with Energy Northwest’s never-completed nuclear
Projects 1 and 3. That debt would otherwise be repaid in fiscal year 2014, but
the repayment date is being extended by means of the new Energy Northwest
Projects 1 and 3 bonds to more closely match the original expected useful lives
of the projects.
This “regional cooperation debt” transaction will free-up
funds that BPA expects to use to prepay equal amounts of higher-interest rate
federal debt and thereby obtain approximately $130 million of present value
savings. Regional cooperation debt refers to existing debt associated with the
Columbia Generating Station and projects 1 and 3 that also serve as a regional
financial resource, providing remarkable debt management opportunities to lower
costs of power for the benefit of the Pacific Northwest.
This transaction is part of a larger debt restructuring
proposal that could allow BPA to lower its Federal Columbia River Power System
interest expense and reduce the weighted average maturity of BPA’s overall debt
portfolio -- which includes Energy Northwest bonds, BPA’s appropriations
repayment responsibilities and the bonds BPA issues to the United States
Treasury, among other items. This transaction is expected to price on Aug. 5
and close on Aug. 21.
“Debt management measures such as this one have saved, and
can continue to save, rate payer money,” said Javier Fernandez, BPA acting
Treasury manager. “They can also provide us capital spending flexibility, which
is important as we undertake capital intensive efforts to preserve and enhance
the value of our hydro and transmission infrastructure.”
Similar efforts in the past helped BPA preserve and restore
$2 billion in U.S. Treasury borrowing authority and saved $500 million in
interest.
Energy Northwest, also with BPA’s support, may in the future
refinance approximately $1.4 billion aggregate principal amount of outstanding
regional cooperation debt that would otherwise mature in fiscal years
2015-2018. These possible future transactions would be similar to the 2014
regional cooperation debt transaction and could provide similar economic
benefits. If the entire proposal is implemented, the projected savings would reduce
BPA’s aggregate interest cost and restore valuable U.S. Treasury borrowing
authority, an essential element in financing necessary capital investments in
the Federal Columbia River Power System. Broad regional support led to the 2014
transaction and BPA believes that regional support appears to be building for
the future possible regional cooperation debt transactions.
“BPA is extremely appreciative of the leadership of the
Energy Northwest executive board and the management and staff of Energy Northwest
for grappling with these refinancing efforts for the region,” added Fernandez.
The three bond rating agencies affirmed ratings on
BPA-backed debt include: Standard & Poor’s (AA-), Moody’s (Aa1) and Fitch
(AA).
BPA is a nonprofit federal agency that markets renewable
hydropower from 31 federal hydro projects in the Columbia Basin and power from
Energy Northwest’s Columbia Generating Station. BPA also operates
three-quarters of high-voltage transmission line capacity in the Northwest and
funds one of the largest wildlife protection and restoration programs in the
world. BPA and its partners have also saved enough electricity through energy
efficiency projects to power four large American cities. For more information,
contact us at 503-230-5131 or visit www.bpa.gov.
