CHICAGO - The Missouri Joint Municipal Electric Utility Commission - which is entering the electrical generation business with a splash by participating in three coal-fired plants now under construction - will issue about $55 million of taxable mostly Build America Bonds Thursday to wrap financing for its $1.4 billion Plum Point plant.
The deal includes two pieces, one a small taxable piece for $4.8 million that does not qualify for a tax-exemption.
The remaining bonds will be sold as taxable BABs, though the preliminary offering statement leaves open the ability to shift some of the debt to a tax-exempt series based on preliminary pricing figures expected today, said the municipal joint action agency's chief financial officer, Mike Loethen.
The commission would apply for the federal government's 35% direct-pay interest subsidy.
Structural details and call features were still being discussed yesterday as the utility seeks to maximize its potential savings using the BAB program. The commission's bonds are rated in the high triple-B category to low single-A category.
"We are still looking at all of our options," Loethen said.
Wells Fargo Securities is the senior manager and McDonald Partners Inc. is financial adviser.
Proceeds of the sale will complete the utility's financing needed to cover its 22.1%, or 147 megawatts, leasehold stake in the 665-megawatt pulverized coal-fired Plum Point generating facility under construction in Osceola, Ark. The project is 80% completed and scheduled to open in 2010.
The bonds are supported by a maximum annual debt service reserve and operating and maintenance reserves. They are to be repaid with revenues from power purchase agreements between the commission and seven municipal electric utilities.
The commission came to market for the first time in 2006 with $280 million of bonds for the project. It is also participating in the Iatan 2 project in Missouri. The utility sold $104 million in March to wrap financing for its 100 megawatt stake in the $1.9 billion 850-megawatt Iatan project.
The utility also has a 195-megawatt ownership stake in the $2.9 billion, 1,600-megawatt Prairie State Energy Campus in southwestern Illinois.
Prairie State is scheduled to begin operating in the summer of 2012. The commission will sell $80 million to $100 million later this year or next to wrap up its costs for the project.
While the utility has some generating capacity from wind turbines and from its participation in an ethanol plant project, the opening of the plants will mark its first entrance into the world of utilities that generate their own power.
The Plum Point is the first expected to open and has a fixed price and guaranteed completion date. The JPA began considering its participation in the projects earlier in the decade as a means to achieve more stable pricing over open market power purchases.
Standard & Poor's, in affirming the commission's BBB-minus rating on its Plum Point debt, said the credit is tied to the ratings of the local utilities that have signed purchase agreements.
"Because the credit quality of the small utility systems that are the ultimate obligors' of MJMEUC's debt obligations is the principal driver underlying MJMEUC's debt rating, the rating could improve if the seven MJMEUC members' credit quality strengthens," analyst Theodore Chapman wrote.
Moody's Investors Service, in affirming its Baa1, said the commission's challenges include its lack of experience as an owner of power generation and governance concerns as Plum Point Energy Associates - which is a co-owner and manager of the project - because one of its owners is a speculative-grade issuer and another is a private-equity firm.
