20220906_INTG2206_jt1.pdf

DECISION MEMORANDUM
TO:COMMISSIONER ANDERSON
COMMISSIONER CHATBURN
COMMISSIONER HAMMOND
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:JOSEPH TERRY
CLAIRE SHARP
DATE:SEPTEMBER 6,2022
RE:INTERMOUNTAIN GAS COMPANY'S REQUESTFOR
AUTHORIZATION TO RENEW AND INCREASE A REVOLVING
CREDIT AGREEMENT;CASE NO.INT-G-22-06
BACKGROUND
On August 25,2022,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 $100 million,not to exceed a five (5)year period,
with the option to borrow an additional $25 million,for a total requested line of credit authority
of $125 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 August 23,
2022.
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 of administrative fees of $15,000
annuallyand 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 -1 -SEPTEMBER 6,2022
SOFR Base
Pricing Indebtedness to Facility Advances/Letter Rate
Level CapitalizationRatio Fee of Credit Fee Advances
I à 0.60:1.0 0.300%1.550%0.450%
II 20.55:1.0 but <0.60:l.0 0.225%1.375%0.275%
III 20.45:1.0 but <0.55:1.0 0.175%1.175%0.075%
IV <0.45:1.0 0.125%1.100%0.000%
The higher the debt incurred,the greater the borrowing cost for borrowed funds.The
debt ratio for the Company was 49.3%as of June 30,2022,which places it in the 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 both Fitch and
Moody's.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,$100 million revolving line of credit with the option to borrow another $25 million.
Staff recommends the Commission order the Company to continue filing quarterly
reports identifyingthe date of issuance,principal amount,interest rate,date of maturityand
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 5-year revolvingline of credit for $100 million with
the option to utilize an additional $25 million?
Does the Commission wish to establish the filing requirements as described above?
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Udmemos/INT-G-22-06 Decision Memo
DECISION MEMORANDUM -2 -SEPTEMBER 6,2022