20240402Decision Memo.pdf

DECISION MEMORANDUM
TO: COMMISSIONER ANDERSON
COMMISSIONER HAMMOND
COMMISSIONER LODGE
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM: JOSEPH TERRY
MICHAEL DUVAL, DEPUTY ATTORNEY GENERAL
DATE: APRIL 2, 2024
RE: IN THE MATTER OF INTERMOUNTAIN GAS COMPANY'S
APPLICATION FOR AUTHORIZATION TO AMEND, EXTEND,AND
INCREASE ITS REVOLVING CREDIT AGREEMENT; CASE NO. INT-
G-24-01.
BACKGROUND
On March 22, 2024, Intermountain Gas Company ("Company"), a subsidiary of MDU
Resources Group, Inc. ("MDU'), filed an Application requesting authorization to renew and
increase a Revolving Credit Agreement to $175 million, not to exceed a five (5)year period,
with the option to borrow an additional $50 million for a total requested line of credit authority
of$225 million("Line of Credit"). The Company represents that the proceeds from the Line of
Credit will be used for capital expenditures, deferred gas costs, and general corporate purpose
needs, consistent with the public interest and necessary, appropriate, and consistent with its
performance as a public utility. The Company submitted the correct filing fee on March 25,
2024.
For the Line of Credit, the Company has the option to select between predetermined
interest rate methods—the Secured Overnight Financing Rate ("SOFR")plus an applicable
margin from the SOFR Advances column, or the Base Rate (which is the higher of(a) U.S. Bank
prime rate, (b) the federal funds rate plus .50%, or(c) a daily rate equal to the one-month SOFR
plus 1.00%). The Line of Credit includes additional charges for administrative fees of$15,000
annually and commitment fees based on a performance grid. The performance grid has four
levels with the rate determined by the ratio of consolidated funded indebtedness to total
capitalization as shown in the table below:
DECISION MEMORANDUM - I - April 2, 2024

SOFR Base
Pricing Indebtedness to Facility Advances/Letter Rate
Level Capitalization Ratio Fee of Credit Fee Advances
I >0.60:1.0 0.250% 1.625% 0.450%
II >0.55:1.0 but<0.60:1.0 0.200% 1.375% 0.275%
III >0.45:1.0 but<0.55:1.0 0.150% 1.125% 0.075%
IV < 0.45:1.0 0.100% 1 1.000% 0.000%
The higher the debt incurred, the greater the borrowing cost for borrowed funds. The
debt ratio for the Company was 47.1% as of December 31, 2023, which places it in Level III
pricing.
The Company is not independently rated by any of the rating agencies and instead is
rated as part of the MDU's family of companies. MDU was rated at BBB+by Fitch and BBB by
S&P Global. Because the Company is approximately 5% of MDU's net income, this authority
has a low probability of impacting MDU's credit rating.
STAFF RECOMMENDATION
Staff recommends the Commission approve the Application for authority to enter into the
five-year, $175 million revolving line of credit with the option to borrow another $50 million.
Staff recommends the Commission order the Company to continue filing quarterly
reports identifying the date of issuance, principal amount, interest rate, date of maturity and
identity of payee for all promissory notes issued in that quarter. In addition, the Company should
continue filing its capitalization ratios with the quarterly report.
COMMISSION DECISION
Does the Commission approve the five-year revolving line of credit for$175 million with
the option to utilize an additional $50 million?
Does the Commission wish to establish the filing requirements as described above?
Jo h Tiry
I:\Uti1ity\U1)MEM0S\WTG2401 Memo.docx
DECISION MEMORANDUM - 2 - April 2, 2024