CHICAGO — McLean County, N.D., will enter the market next week with $83 million of solid-waste facilities revenue bonds on behalf of wholesale power supplier Great River Energy.
The county expects to price the debt Thursday. The transaction follows the late-April sale of $23 million of Series A solid-waste facilities revenue bonds, also on behalf of Minnesota-based GRE.
Those bonds, with a 2026 maturity date, captured an interest rate of 4.875%.
Thursday’s transaction will feature two series, one for $50 million and one for $33 million. Proceeds from the $50 million issue will be used to finance construction of a solid-waste facility at Spiritwood Station, GRE’s newest North Dakota plant. Proceeds from the $33 million Series C bonds, as well as the $23 million Series A bonds sold in April, will be used to refund outstanding debt.
GRE is a public power cooperative that provides wholesale electric energy to 28 member cooperatives and serves more than 641,000 customers in Minnesota and part of Wisconsin. GRE is the fourth-largest generation and transmission cooperative in the U.S.
Goldman, Sachs & Co. is the underwriter. Orrick, Herrington & Sutcliffe LLP is bond counsel.
Ahead of the deal, Standard & Poor’s upgraded GRE’s issuer rating to A-minus from BBB-plus. Fitch Ratings rates the cooperative’s debt A-minus. Moody’s Investors Service gives it an A3 rating.
North Dakota is giving GRE a portion of its private-activity volume cap so that the bonds can be sold as tax-exempt because the projects being financed qualify under Internal Revenue Service rules. As a cooperative, GRE is typically restricted from issuing tax-exempt debt, and all of its roughly $2.3 billion of outstanding debt is currently taxable, said Susan Brooks, GRE’s treasury director.
“We would be interested in the ability to issue additional tax-exempt debt, but we would have to ensure that any projects would qualify for tax-exempt issuance,” Brooks said.
The bonds are secured by a first lien on nearly all of GRE’s assets, including its generation and transmission facilities and its service contracts with members. The cooperative maintains wholesale power contracts with 28 members, and operates three plants in North Dakota and six in Minnesota.
Fitch analysts said the cooperative has a historically high debt level, but that its management has tried to mitigate the burden by trimming its five-year capital plan by $350 million. GRE now has a debt-service coverage level of 1.2 times — and maintaining that target is key to keeping its A-minus rating and stable outlook, Fitch said.
Like other public power utilities, GRE’s heavy reliance on coal could mean future challenges resulting from congressional environmental regulations and technological advances.
A regional transmission project called CapX2020 that currently calls for $250 million of additional debt is expected to be GRE’s largest capital expenditure through 2013, Fitch said.