20100303_2877.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:MARCH 1,2010
RE:P ACIFICORP'S SHELF AUTHORITY REQUEST OF $2 BILLION DEBT;
CASE NO. PAC-I0-
On February 5, 2010, PacifiCorp filed an Application requesting authority to incur debt
up to $2 000 000 000 aggregate principal amount at anyone time. PacifiCorp requests this
additional authority remain in effect through February 28, 2015 so long as the Company s bond
ratings for senior secured debt remain investment grade. Investment grade is BBB- or higher by
Standard & Poor s Rating Services (S&P) and Baa3 or higher by Moody s Investors' Service
Inc. (Moody s). PacifiCorp s current senior secured debt ratings are A by S&P and A2 by
Moody s. PacifiCorp also requests authority to enter into the following as may be appropriate:
letter of credit arrangements to provide additional credit support, currency swaps, or contribute
or sell debt to special purpose entities (SPE) based on the common securities ofthe SPE. Staff
does not expect a SPE will be the likely form of financing with the new consolidation accounting
requirements. If a SPE is utilized, the Company will notify the Commission of its intent and
provide all associated terms of the transaction.
The requested authority will supplement the financing flexibility previously authorized in
Case No. PAC-07-, Order No. 30489, approving a $2 Billion authority. Under the current
authority, $1.8 Billion has been issued. The remaining $200 Million is not anticipated to be
utilized if the current request is granted and could be withdrawn if the Commission so orders.
The securities will be issued in one or more transactions and consist of securities issued or
exchanged as public or private placements, domestically or overseas, in the form of secured
unsecured, subordinated debt or other indebtedness. The terms and interest rate for each issue
will be determined at the time of issuance. The issuance(s) may be at a fixed or variable interest
DECISION MEMORANDUM MARCH 1 2010
rate based on a published index of short-term rates such as Treasury bills, commercial paper or
LIBOR. Fees will be charged based on the type of security issued but are expected to average
1% - 3% ofthe outstanding balance with some transactions carrying fees up to 3.15%. Any First
Mortgage Bonds issued will be issued under the PacifiCorp Mortgage. The Commission has
previously authorized the Company to incur the lien of the PacifiCorp Mortgage in Case
No. U -1046-, Order No. 22157. The variety of funding options requested will allow the
Company to evaluate the all-in cost of each after considering all associated fees so the issuances
result in borrowings at lower costs.
The requested financing authority will provide funds for one or more utility purposes.
These include capital requirements for the following purposes: redemption of approximately
$600 Million debt, acquisition or construction of new plant, including renewable resources
along with the improvement or maintenance of existing generation, distribution, transmission
and general plant to provide or improve utility services.
ST AFF RECOMMENDATION
Staff recommends approval of the shelf authority of $2 Billion debt for the period
through February 28, 2015. The Company s prior commitment since Case No. PAC-99-3 to a
cost test remains effective where foreign transactions will not be utilized for ratemaking unless
and until PacifiCorp can show that the all-in costs are not greater than the all-in cost of similar
domestic borrowings.
The remaining commitments and terms in prior cases, including Case No. PAC-07-
Order No. 30489, remain effective. As a condition of this authority, PacifiCorp s senior secured
debt will be rated at investment grade or PacifiCorp will follow the established procedure of
notification if the ratings drop. PacifiCorp will still be required to notify the Commission of its
intent to utilize a SPE and provide all details anticipated with the transaction. The required
Quarterly Financing Activity Reports and credit rating reports, to the extent not filed in the
MEHC Acquisition Case No. P AC-05-, Order No. 29998, will continue to be filed in this
case.
DECISION MEMORANDUM MARCH 1 2010
COMMISSION DECISION
Should the $2 Billion shelf authority for debt be approved?
Should the authority be approved with the existing terms and conditions including
maintaining the investment grade rating, continuing the additional reporting requirements
notifying the Commission when a SPE will be utilized and providing the anticipated details of
the transaction, and meeting the all-in cost test commitment for foreign transactions?
i:udmemos/pace 1 0.2 tc dm.doc
DECISION MEMORANDUM MARCH 1 2010