BRADENTON, Fla. - The South Carolina Public Service Authority, known as Santee Cooper, will price $1.7 billion of taxable and tax exempt bonds as early as Tuesday if market conditions warrant.
The bonds will be sold to institutional buyers.
The proceeds will be used to pay $541 million of Santee Cooper’s partial cost for new nuclear units at the V.C. Summer plant, $340 million for environmental purposes and capital needs, and $867 million to refinance existing debt.
The transaction will be structured as $811 million of tax-exempt Series A bonds, $399 million of tax-exempt Series B refunding bonds, $212 million of taxable C bonds, and $326 million of variable-rate taxable D bonds.
Series A, B and C will be term bonds maturing between 2042 and 2053.
The Series D bonds will be based on the London Interbank Offered Rate index plus a spread with bullet maturities in 2015 and 2016.
“The term bonds were recommended by our underwriters to help us best accomplish our goal to better align our debt over the life of the assets,” said Mollie Gore, spokeswoman for the state-owned water and electric utility.
“The bonds will be marketed to institutional buyers,” she said.
“We are prepared to price as early as July 30 and will monitor the market for the best opportunity,” Gore said.
The bonds are rated AA-minus by Fitch Ratings and Standard & Poor’s, and A1 by Moody’s Investors Service. Fitch’s rating carries a negative outlook, while the other two rating agencies have stable outlooks.
A trader said the South Carolina Public Service Authority is “a good name” in the bond market. “Customers seem to prefer [South Carolina’s] essential service revenue bonds,” she said.
The deal could price at plus-80 basis points or wider over Municipal Market Data’s triple-A scale, the trader said.
“Santee Cooper is well-regarded in the municipal bond community and highly rated among our peer group,” Gore said. “We typically receive a good response to our bond issues.”
Santee Cooper, named after nearby lakes, is one of the nation’s largest municipal wholesale utilities and serves about two million South Carolinians, 167,000 residential, commercial, and small industrial retail customers, and 29 large industrial customers.
The utility recently extended the supply contract with its largest customer, Central Electric Cooperative, to 2058.
Traditionally, Santee Cooper has amortized its debt based on the potential termination of the Central Electric contract, and the expected lives of capital assets. With the contract extension the authority plans to extend the average life of its debt going forward to fund current and future projects, and to conduct a multi-year refinancing program.
The authority currently projects that up to $900 million of bonds maturing through 2031 could be refunded and extended over the term of this program, in addition to the revenue obligations to be refunded with the proceeds of the 2013 bonds, according to bond documents.
Though Fitch analyst Alan Spen said the contract extension with Central Electric is viewed positively, the agency’s negative outlook reflects Fitch’s view that Santee Cooper “faces a number of challenges over the next several years, including slower growth, a large capital program, and the ability to manage its excess ownership share of the new Summer nuclear plant expansion project.”
The authority is negotiating with Duke Energy Carolinas and other utilities to sell a portion of its 45% ownership interest in the two nuclear units that are under construction by South Carolina Electric & Gas. in Jenkinsville, S.C.
Goldman, Sachs & Co. is the book-runner for the A and B bonds. Barclays Capital Inc. is managing the Series C bond sale. Morgan Stanley & Co. is running the book for the D bonds.
The syndicate also consists of Bank of America Merrill Lynch, Citi, JPMorgan, and Wells Fargo Securities.
Public Financial Management Inc. is the authority’s financial advisor.
Haynsworth Sinkler Boyd PA is bond counsel. The McNair Law Firm PA is underwriters’ counsel.