20040105_723.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:DECEMBER 29, 2003
RE:IN THE MATTER OF INTERMOUNTAIN GAS COMPANY'S APPLICATION
FOR AUTHORIZATION TO ISSUE AND SELL DEBT SECURITIES.
CASE NO. INT -03-
On December 15 2003 , Intermountain Gas Company (IGC, Company) applied to the
Idaho Public Utilities Commission for authority to enter into a renegotiated senior revolving line
of credit agreement with Wells Fargo Bank, N.A for amounts up to $35 000 000. The proceeds
will continue to be used to refinance existing indebtedness, provide for working capital, deferred
gas costs and general corporate purposes including interim construction financing and medium
term needs prior to the issuance oflong-term debt. This dollar amount is an increase of
$10 000 000 from the $25 000 000 currently authorized by Order No. 28672 through December
2005. The new authority will allow IGC to enter into agreements that extend beyond
December 15, 2005. The term of the new agreement is three years from the date the agreement is
executed. IGC will continue to make quarterly reports to the Commission showing balances
outstanding and the interest rate.
The interest rate will be based on London Interbank Offered Rates (LIBOR) or a Base
Rate defined as the higher of Wells Fargo Bank's (WFB) Prime Rate or the Federal Funds Rate
plus 0.5% depending on the capitalization ratio of Intermountain Gas Company at that time.
There also continues to be an unused fee to help IGC minimize the total cost of the credit line.
IGC's common equity ratio as of September 30 , 2003 is 49.6% (50.4% capitalization ratio) with
$11 500 000 of the revolving note outstanding. The rates would be LIBOR plus 160.0 basis
DECISION MEMORANDUM DECEMBER 30, 2003
points or the Base Rate with zero basis points, currently approximately 3% - 4 %. Draws using
LIBOR require a 30 day commitment so actual amounts outstanding may consist of both LIBOR
and Base Rate traunches. If the full $35 000 000 line of credit amount were outstanding, the
equity ratio would be at a lower TIER level and the interest rate margins would increase 20 & 25
basis points.
All fees have been paid in accordance with Idaho Code 8 61-905.
Staff recommends approval of the Application for the three years.
COMMISSION DECISION
Should an order authorizing Intermountain Gas Company to enter into an agreement with
Wells Fargo Bank for a revolving line of credit of $35 000 000 for the three-year term be
approved?
j mm CcuJo cfi
Terri Carlock
tcarJoc\intgO3.2decm
DECISION MEMORANDUM DECEMBER 30, 2003