CHICAGO — The Omaha Public Power District, the fourth highest-rated utility in the U.S., on Thursday will price up to $150 million of electric system revenue bonds.
The finance team held a retail order period Wednesday. By early afternoon it appeared that investors had snapped up almost half the issue. The OPPD typically sells anywhere from 20% to 70% of its bonds to retail buyers, depending on the structure, said John Thurber, the utility’s division manager of finance.
The OPPD had planned to refund the bonds last November when it entered the market with $120 million of taxable Build America Bonds. But it pulled the refunding amid rising rates and heavy supply.
The utility returns to a lighter-supply environment that officials hope will allow it to achieve its net present-value savings target of 5%, or $8 million over the life of the debt. The transaction will advance refund bonds originally issued in 2002 and 2005 without extending the final 2024 maturity.
Moody’s Investors Service and Standard & Poor’s rate the bonds Aa1 and AA, respectively.
Goldman, Sachs & Co. is senior manager and Bank of America Merrill Lynch is co-senior, with seven additional firms rounding out the underwriting team. Kutak Rock is bond counsel and Barclays Capital Inc. is financial advisor.
The bonds are secured by a revenue pledge from the district’s electric system.It will be its first refunding since 2005, though it has issued new money nearly every year since 2002 to finance construction of a new coal-fired plant and improvements to its nuclear plant, Fort Calhoun.
The OPPD has a new five-year capital plan that totals $1.1 billion, Thurber said. Bonds are expected to finance one-third, and the utility will likely enter the market next year with up to $200 million of debt for the plan, he said.
The district is the nation’s 12th largest utility based on customers served, which total 771,000. It serves Omaha and 47 other cities across a 5,000-square-mile area. Its competitive position is strengthened by Nebraska’s status as an all-public power state that prohibits investor-owned utilities, analysts noted.
The district’s double-A rating also reflects its diverse customer base, its ability to set its own rates, and the fact that it owns most of its generation, according to credit analysts.
The utility has $1.6 billion of outstanding debt that includes $1.2 billion of senior-lien electric system revenue bonds and $150 million of commercial paper. All of its debt is in a fixed-rate mode.
Like most power utilities, the district faces challenges tied to future regulation of greenhouse emissions and other environmental issues, according to credit analysts.
“Future rating reviews will factor the financial impact of potential national regulation relating to carbon emissions and renewable standards and OPPD’s ability to manage the compliance process,” Moody’s analyst John Medina wrote in a report on this week’s bond sale.
The utility’s Fort Calhoun nuclear plant has required recent improvements but overall has a stable history, analysts said.
Last fall the Nuclear Regulatory Commission issued a so-called yellow finding during its inspection of Fort Calhoun due to a failure to maintain proper procedures for handling an external flood, according to bond documents.
Management addressed the problems and the NRC has scheduled a follow-up inspection in June.
Meanwhile, in April the commission issued a preliminary yellow finding in another section of the nuclear plant due to a failure of a component in a plant protection system.
“The failed component and all three of its backups have since been replaced,” documents said. Moody’s noted that the Fort Calhoun plant has significant differences from the Japanese nuclear plants that failed during that country’s recent earthquake and tsunami flooding.