CHICAGO - Lincoln, Neb., is bringing $210 million of double-A rated electric revenue bonds to market this week on behalf of the city-owned Lincoln Electric System, a rare issuer that boasts some of the lowest electric rates in the country.
The finance team is holding a one-day retail order period Wednesday, and hopes to sell a fair amount of the debt to individual investors. Institutional sales will be Thursday.
The transaction marks the first time the utility has opted for a negotiated sale, a move done in part to attract retail buyers, said Laura Kapustka, the system's chief financial officer. The system has been advertising the bond sale in newspapers and radio spots across the state, she added.
"We're owned by our ratepayers, so it gives them another opportunity to participate," Kapustka said. "Also, Nebraska is the only public-power based state."
Of the $210 million, $30 million will mature between 2013 and 2015. The next maturities are 2021 through 2032, and another $30 million of term bonds mature in 2037.
The bulk of the bonds will be used to refund debt issued in 2002 and 2003. Another $40 million of the proceeds will be used to refinance commercial paper into long-term fixed-rate debt and $50 million of new money will be used to reimburse the system for cash it has spent on various capital projects.
The utility expects to achieve a net present-value savings of up to 12% on the refunding, or $18 million.
Bank of America Merrill Lynch is senior manager on the deal. Gilmore & Bell PC is bond counsel and Public Financial Management is financial advisor.
In an investor road show ahead of the deal, the finance team touted the system's AA ratings from Fitch Ratings and Standard & Poor's, its average debt service coverage level of two times, its service area in triple-A rated Lincoln and a stable economy with an unemployment rate of just 3.8%.
Like many utilities, the Electric System faces challenges from future environmental regulatory actions from Congress, many expected to come within the next five years. Nearly all of the system's energy comes from coal. But the new laws are expected to have relatively little impact on LES' bottom line, officials said during the road show.
"We do have a plan and we're actively watching to see what happens," Kapustka said. "LES projects relatively limited capital investments will be necessary for our units."
