MENLO PARK, Calif. — The Southern California Public Power Authority Tuesday priced $525.6 million of revenue bonds that will be used to secure power from a wind farm in Washington State.
The deal, one of the largest scheduled tax-exempt issues of the week, reflects California public utilities’ scramble to grab renewable energy under state requirements that they lower greenhouse gas emissions.
The SCPPA priced the deal for retail Tuesday morning and re-priced for institutions in the afternoon. JPMorgan is lead manager. The issue priced with yields from 0.45% for 2012 maturities to 3.74% for 2030 maturities, according to Thomson Reuters.
Standard & Poor’s and Fitch Ratings each rate the bonds AA-minus.
“The market is pretty strong for well-rated essential service-type issues,” said Kenneth Naehu, managing director and fixed-income portfolio manager at Bel Air Investment Advisors LLC in Los Angeles. “The simple story is that essential-service credits and well-rated bonds are going to be moved at very attractive levels for the issuer.”
Public Financial Management is financial adviser. Fulbright & Jaworski LLP and Curls Bartling PC are co-bond counsel.
The authority is selling the bonds for the Los Angeles Department of Water and Power, the nation’s largest municipal utility with 1.45 million electric customers, and the city of Glendale, both of which are members of the SCPPA.
The money from the sale will be used to prepay for electricity and to fund the a 262-megawatt wind project, consisting of 114 turbines near Goldendale, Wash., according to a recent report from Standard & Poor’s.
The SCPPA sale will help prepay for 11.1 million megawatt hours of wind power generation that will be received in stages over a 20-year period, the report said.
The farm is part of the the Windy Point/Windy Flats project, developed by the Cannon Power Group.
It spans a 26-mile ridge line along the Columbia River and is one of the largest wind projects in the country. It is partly financed by a $200 million U.S. Department of Energy grant.
The energy from the project will help LADWP meet renewable energy targets that have been mandated by the state.
“I believe you will be seeing more renewable resource projects,” said Fitch analyst Chris Jumper. “These are legislatively driven and that is the momentum behind these projects.”
Jumper said long-term changes required by California legislation to reduce greenhouse gas emissions will likely increase power supply costs to electric utilities in the state, including LADWP.
The entire wind farm will displace more than 800 metric tons of carbon dioxide a year once it is finished in early 2011, according to Cannon Power.
The wind project has operated at a high capacity compared to other U.S. wind projects, but still low compared to traditional energy sources, Jumper said in a recent report.
