In one of the largest deals in the week of April 7, Energy Northwest in Washington is planning to sell $646.5 million of revenue bonds to finance nuclear power projects and refund outstanding debt.
The deal arrives with double-A level ratings based on support from the federal Bonneville Power Administration.
The new money portion is estimated to be around $200 million, which will fund additions and improvements to the agency's Columbia Generating Station, a nuclear power plant about 160 miles southeast of Seattle.
The station produces approximately 1,170 megawatts of electricity, equivalent to about 10% of Washington's power and 4% of all the electric power used in the Pacific Northwest, according to the agency's website.
The facility's output is provided to the Bonneville Power Administration at the cost of production under a formal net billing agreement, in which BPA pays the cost of maintaining and operating the facility. BPA takes the generation that Columbia produces, and, in combination with 31 federal dams, provides a total 23,000 megawatts of power to Washington, Oregon, Idaho, northern California and western Montana, Jon Dull, manager of debt and investment at Bonneville Power Administration, said in an interview.
Yearly capital investment normally includes a $100 million issuance. Energy Northwest last year instead chose a line of credit with KeyBank, which will be repaid through the $200 million of new money in this week's issuance, Dull said.
"The $100 million is capital investment in the plant," Brent Ridge, chief financial officer at Energy Northwest, said in an interview. "Two years ago we received a license extension of the power plant to November of 2043 so we've started to do life-extension modifications. This investment is related to equipment like our valves, pumps and pump motors that need to be managed for the long-haul."
Energy Northwest is a public power joint operating agency formed by Washington law in 1957 to produce power for Northwest utilities.
It has come a long way from its days as the Washington Public Power Supply System, when it rocked the municipal bond market with a $2.25 billion default. More than three decades later, it successfully manages a more than $6 billion debt portfolio, the vast majority of which, like the new issue, enjoys BPA backing.
The utility is headquartered nearby in Richland, Wash.
The new bonds will be supported by the net billing agreement with BPA, a federal agency in the Pacific Northwest that markets electric power from the Bonneville Dam, located on the Columbia River.
Credit rating agencies have assigned the bonds ratings in the double-A category, citing the credit quality of Bonneville.
Moody's Investors Service assigned the bonds the same rating it gives Bonneville - at Aa1, with a stable outlook.
"BPA's Aa1 issuer ratings benefit from fundamental credit strengths comprising of US Government support features, strong underlying hydro and transmission assets, competitive power costs, and power supply contracts with customers through 2028," Moody's analysts said in the credit report.
Analysts also noted Bonneville's long history of meeting its contractual obligations.
Fitch Ratings assigned the bonds a AA rating and Standard & Poor's gave a AA-minus rating. Both assign stable outlooks.
Next week's deal consists of three series, including $531 million of Columbia Generating Station electric revenue and refunding bonds. Around $26 million will be Project 3 electric revenue refunding bonds, and the remaining $90 million will be taxable revenue and refunding bonds.
The deal will be structured with serial and term bonds, with a final maturity in 2040.
JPMorgan is the lead manager. Foster Pepper PLLC is bond counsel and Public Financial Management, Inc. is financial advisor.
