CHICAGO — The Nebraska Public Power District will price $234 million of new-money and refunding general revenue bonds Wednesday to capture interest rate savings and finance capital projects at its nuclear plant.
The finance team held a retail order period Tuesday and wraps up Wednesday with an institutional pricing. The district typically sells about 20% of its bonds to retail investors.
The new-money piece of the deal totals $64 million, which will finance capital projects at the Cooper Nuclear Station, the district’s only nuclear plant and one of two in Nebraska.
The borrowing is the first of two NPPD plans for this year to raise money for capital projects at the nuclear plant; the other one is set for the fall.
The deals come as the NPPD, like all U.S. power entities with nuclear plants, awaits word from the federal Nuclear Regulatory Commission about whether upgrades will be required in the aftermath of the disaster that befell the Fukushima Dai-ichi nuclear plants in Japan after the March 2011 earthquake and tsunami.
The NPPD could face cost pressures from new safety directives, which would add to its already sizable capital needs, according to analysts. But the district said it’s not worried over the possible impact.
“We think there will be something that comes out of it, but we’re not expecting anything major,” said Traci Bender, the district’s chief financial officer and treasurer. “We’ve done a lot of plant modifications already that makes us look different from the Japanese plants.”
With coal representing more than half of its energy supply, the district is also exposed to added expenses that could arise from future coal emission regulations.
Cooper Nuclear Station escaped damage from last summer’s record flooding of the Missouri River. Nebraska’s other nuclear plant, the Omaha Public Power District’s Fort Calhoun Station, remains shut down after a routine scheduled outage was extended after the flood.
Missouri River floodwaters got close to the Cooper station, but ultimately did not damage the facility or interrupt operations. Most of the district’s flood-related costs come from staffing issues and the cost of building temporary flood berms, officials said.
The district’s grid is supported by around 25% nuclear power — considered high for a power utility — while coal accounts for around 60%. The remainder comes from gas, oil, wind and hydro power. In addition to the nuclear station, it owns two coal plants and invests in a third, and owns a variety of wind and transmission projects.
The district is a major player in Nebraska, serving customers in nearly all 93 counties, and benefits from the state’s relatively strong economy and its status as an all-public power state, which eliminates competition from investor-owned utilities.
The NPPD’s debt-service coverage levels have averaged 1.65 times in recent years, according to Fitch Ratings. The district has $1.95 billion of parity senior-lien general revenue debt outstanding.
Its capital plan totals $1 billion through 2015. Debt will finance more than half of the plan, with $380 million coming from annual revenues, according to Standard & Poor’s.
The finance team hopes to achieve a net present-value savings of 5% on the refunding bonds, which total roughly $170 million from issues in 2003 and 2005, said Bender, the CFO.
JPMorgan is the senior book-running manager, leading a team of 13 additional underwriting firms. Fulbright & Jaworski LLP is bond counsel and Castleton Partners LLC is financial advisor.
Ahead of the sale, all three rating agencies affirmed their ratings on NPPD. S&P rates it A with a stable outlook. Fitch affirmed its A-plus rating and Moody’s Investors Service affirmed its equivalent A1 , both with stable outlooks.
Bond documents for this week’s sale acknowledge a possible impact on the credit from the NRC’s final safety reviews and say that the specific affects of the regulator’s recommendations on Cooper Nuclear Station have not yet been fully evaluated. But the district is not bracing for major plant upgrades, Bender said.
The task force is expected to focus particularly on strengthening back-up power, to extend the time reactors can be maintained safely without offsite power.
Lack of backup power for cooling triggered the Fukushima nuclear disaster after the reactors survived the powerful earthquake and subsequent tsunami.
Despite the possible new regulations, the NRC has shown confidence in the existing U.S. nuclear power industry since the Japanese disaster, noted Standard & Poor’s analyst David Bodek.
The commission has continued to issue new licenses for existing plants whose licenses were expiring and issued statements affirming the industry’s safety.
The re-licensing is “essentially an endorsement that they think that nuclear power continues to be safe and these plants can continue to be operated beyond the life of their original licenses,” Bodek said. “The NRC is essentially standing behind nuclear power.”
Because coal makes up more than half of its energy supply, the NPPD is also exposed to emissions regulations.
The district has two main coal plants and invests in a third. One of them, Sheldon Station, is aging, with one generating unit 51 years old and the other unit 44 years old. The NPPD’s second main coal plant, the Gerald Gentleman Station, is relatively younger at 34 years, said Bodek.
“When you have an old coal plant, the question becomes does it make sense to make a big investment [in emissions equipment] if it’s nearing the end of its useful life,” he said. “The other station is significantly newer, and there it’s worthwhile to make investments, but the investments do have costs associated with them.”
Despite cost pressures tied to NRC and emissions regulations, credit analysts said they expect the district’s strong management to preserve adequate debt-service coverage levels through cuts and rate increases.