Omaha Public Power District will go to market the week of Jan. 5 with about $164 million of bonds in a deal that brings the first return to market for this particular system since a 2016 advance refunding.
The Series 2026A separate electric system revenue bonds will refund two earlier series of bonds.
The pricing date is "fairly firm," said John Thurber, director of treasury and financial operations at OPPD.
"Obviously, we don't want to price unless it makes sense," he said. "We're refunding two series of older debt, and right now they're well in the money, so our expectation would be to do it right after the holiday season."
OPPD is targeting savings of about 5% in comparison to the old debt service, he said.
Wells Fargo and Piper Sandler are co-senior managers on the deal, with Wells Fargo bookrunning. The financial advisor is Barclays, and bond counsel is Kutak Rock.
Moody's Ratings assigns an A1 rating with a stable outlook. The rating from S&P Global Ratings is due out next week, as is the preliminary official statement.
Moody's said in a rating report that its rating reflects the A2 weighted average credit quality of OPPD participants and the district's strong take-or-pay contracts.
"These contracts have stronger than usual contractual protections, including a step in requirement by OPPD (Aa2 stable) to take the first 50 MW of any defaulted participant(s) on a cumulative basis followed by a separate 60% step-up provision," Moody's said. "These enhancements support the rating being above the weighted average credit quality of its participants backing the bonds."
Other supporting factors include OPPD's full ownership and operational control of a coal plant — the district's primary asset, Nebraska City Station Unit No. 2, represents 50% of a single coal fired plant — and the operating history of the project since 2010.
Moody's factored into the rating the higher environmental risk exposures of coal power.
That was a consideration notwithstanding the Trump administration's embrace of coal, said Clifford Kim, vice president-senior credit officer at Moody's.
"If you look at the long horizon, administrations change over time," he said. "So when the first Trump administration took over, they pulled back a lot of rules implemented under Obama; then you had the Biden administration, which made rules even stricter than during the Obama administration; and now you have the second Trump administration.
"Given the numerous regulatory rules that affect coal, it's not just about carbon, it's particulate emissions, it's air toxics, water usage and wastewater," he said. "There are a lot of different avenues where regulations can be substantially tightened over time, and that can make decision-making around capital investment very difficult… if you don't know what future rules will look like."
The stable outlook incorporates the rating agency's expectation that "the project will continue to provide reliable, long term power to its participants," Moody's said.
The OPPD separate system sold half of the output of the Nebraska City Station Unit No. 2 plant to seven other public power districts, Thurber said. Unit No. 2 is a 687-megawatt coal-fired plant next to Nebraska City Station Unit No. 1, about five miles southeast of Nebraska City.
"These bonds are being paid for from the revenue of five of those seven utilities… to fund their portion of this power plant," Thurber said.
The other two finance the capital costs on their own balance sheets, Kim said.
A driving factor in the rating was the requirement that if a participating district defaults, OPPD must step in for the first 50 megawatts, according to Kim.
"Once we considered that benefit, you get the higher rating," he said.
OPPD operates the Unit No. 2 plant and keeps the other half for its use.
"The bottom line is, the net service savings that we're getting from these bonds will flow into these utilities; we originally financed these bonds on their behalf," Thurber said.
The last bond issue tied to this system was in 2016 — along with the Series 2015A revenue bonds, it is one of the series being refunded now — and its uses of proceeds included the advance refunding of the systems' Series 2006A revenue bonds as well as funding a debt service reserve, according to an official statement shared with The Bond Buyer.
