CHICAGO — Ohio-based public power provider American Municipal Power Inc. today will price $605 million of revenue bonds — the bulk of which are taxable Build America Bonds — to raise funds for the first stage of construction of a trio of hydroelectric plants along the Ohio River.
AMP’s transaction is divided into three series: $25.7 million of federally taxable revenue bonds, $455.1 million of Build America Bonds, and $124.1 million of tax-exempt bonds.
The debt is set to mature in 2044. BMO Capital Markets is the lead underwriter.
Proceeds will refund notes that the utility sold earlier this year and finance partial construction of two of the three hydroelectric plants. The plants, which are expected to have 208 megawatts of total capacity, are to be built on pre-existing dams owned by the U.S. Army Corps of Engineers.
AMP plans to sell another $825 million of revenue bonds next year to complete the first phase of financing for the project. The utility is also considering two more phases of the hydropower development plan, according to credit analysts.
Ahead of the sale, Moody’s Investors Service assigned an A2 rating on the bonds with a stable outlook and Fitch Ratings affirmed its A rating and stable outlook. Standard & Poor’s also affirmed its A rating on the credit.
Analysts generally praised the security behind the bonds, which rests on the utility’s contracts with 79 municipal participants in the project. The participants are required to pay back the debt regardless of whether the projects are completed or operable.
The project is part of AMP’s ongoing effort to reduce its exposure to the wholesale power market by generating its own electricity. As part of the plan, in addition to the hydro plants, AMP has financed a nearly 24% share of the Prairie State Generation Station coal plant in southern Illinois, and is developing a 1,000-megawatt coal-fired plant to be located in Meigs County, Ohio.
“While the capital plan is large at $5.9 billion, the planned generating projects are favorable because they are coming on line to replace purchases from the volatile wholesale market rather than for new load growth,” Fitch in a said report on the upcoming bond sale.
Risks include potentially rising construction costs and future environmental regulations, analysts said. Moody’s also noted that Fat Pocketbook mussels found at the site of one of the future hydro plants will require environmental mitigation.
AMP is a nonprofit wholesale power and service provider that serves 129 municipal electric systems across six states. The utility’s participants serve more than 1.2 million customers across six states.