CHICAGO - American Municipal Power-Ohio expects to enter the market the week of June 16 with the first of four planned revenue bond sales totaling $1.2 billion that will give it a nearly 25% ownership stake in the new Prairie State Energy Campus Project's coal-fired generation plant.

A portion of the proceeds from the revenue bonds will go to refinance all or part of $120 million of bond anticipation notes the utility sold in late March. The notes were issued to provide temporary acquisition financing for AMP-Ohio's 23.3% share of the Prairie project.

While the agency had originally planned to issue $450 million of notes as part of the March transaction, officials scaled it down to $120 million days before they went to market, citing a skittish short-term market and high yields. Officials at the time said they would instead move forward with a fixed-rate revenue bond sale this spring.

JPMorgan is senior underwriter on the transaction. PNC Capital Markets is financial adviser. Rating reports put the size of the upcoming deal at $300 million, but members of the finance team refused to comment on the transaction before pricing.

The 35-year bonds are secured by AMP-Ohio's net revenues, which are derived from take-or-pay power sales contracts with 68 municipal participants that have an average weighted credit rating of A2, according to Moody's Investors Service.

Moody's has assigned an A1 rating with a stable outlook to the bonds. In a report on the sale,Dan Aschenbach said the rating reflects the strong legal security behind the bonds, the underlying credit strength of the groups participating in the Prairie State Project, AMP-Ohio's favorable power supply management record, and several other favorable aspects of the Prairie State project.

Fitch Ratings assigned an underlying A rating to the bonds, citing the financial stability and diversity of AMP-Ohio's 68 municipal participants as well as its positive management history.

Standard & Poor's assigned an A rating with a stable outlook. Its rating primarily reflects the credit quality of AMP-Ohio's largest participating members who are required to pay debt service on the bonds, said analyst Jeffrey Panger. The 10 largest of the 68 retail electric systems would cover 63.4% of debt service.

One of eight municipal joint power agencies that will hold ownership stakes in the $3.7 billion Prairie State project, AMP-Ohio hopes to gain independence from the energy market by becoming an owner and manager of generating power. Currently, 60% of AMP-Ohio's power comes from purchase agreements. The agency hopes to whittle that down to 10% within the next 10 years as a participant in the Prairie State project as well as two other generation projects.

Most of the other seven member agencies of the Prairie project hit the market last summer or fall to finance their ownership stakes. The project is now fully financed.

The $3.7 billion Prairie state coal plant project, located in southwestern Illinois, includes two pulverized-supercritical generating units with a combined 1,582-megawatt capacity and an adjacent mine that is under construction with 200 million tons of coal reserves.

Proponents say it will be a state-of-the-art facility with advance scrubbing systems to produce clean, low-cost electricity to more than 1.7 million households as well as promote business growth across the Midwest. Environmental groups mounted an unsuccessful legal challenge against the project which they contend will still significantly contribute to air pollution.

The project includes a coal mine that is located adjacent to the plant, providing what Moody's calls a "unique advantage" as it eliminates the risks and cost of rail transportation.

By purchasing an ownership stake in the plant, the various joint power agencies hope to add stability to their pricing structures by avoiding the risk associated with purchasing electricity on the open market. The participating agencies have locked in the price for the coal supply for 35 years - the term during which the supply is expected to last. Construction is ongoing, and officials hope to open the first unit in August 2011 and the second in May 2012.

In addition to the Prairie State project, AMP-Ohio is developing two additional generation plants as part of a $4.3 billion capital plan. The agency is working to develop hydro plants along the Ohio River in southeast Ohio, as well as the American Municipal Power Generation Station, a coal-plant also expected to be built near the Ohio River. Construction on that plant currently set to start on that project in spring 2009.

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