20050517Final Order No 29787.pdf

Office of the Secretary
Service Date
May 17 2005
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
ACIFICORP FOR AUTHORITY TO (1) ISSUE
AND SELL OR EXCHANGE NOT MORE THAN
$1,000,000,000 OF DEBT, (2) ENTER INTO
CREDIT SUPPORT ARRANGEMENTS, (3)
ENTER INTO CURRENCY SWAPS, AND (4)
CONTRIBUTE OR SELL ADDITIONAL DEBT
TO SPECIAL PURPOSE ENTITIES
CASE NO. P AC-05-
ORDER NO. 29787
On April 11 , 2005, PacifiCorp filed an Application requesting a five-year shelf
authority to incur debt up to $1 000 000 000 aggregate principal amount at any one time
provided that the Company s bond ratings for senior secured debt remains investment grade
(BBB- or higher by Standard & Poor s Rating Services and Baa3 or higher by Moody
Investors' Service , Inc.). 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
contributions to or sale of debt to special purpose entities (SPE). PacifiCorp requests that the
Commission issue its Order on or before May 31 , 2005.
THE APPLICATION
PacifiCorp submits this Application pursuant to Idaho Code 9 61-901 et seq. and
Procedural Rules 141-150. IDAPA 31.01.01.141-150. The Company seeks authority to (1) issue
and sell or exchange, in one or more public offerings or private placements, not later than May
, 2010, fixed or floating rate debt (Debt) in the aggregate principal amount of not more than
000 000 000 or, if such Debt is issued as an original issue discount, such greater amount as
shall result in an aggregate offering price of not more than $1 000 000 000 (or its equivalent
amount in, or based upon, foreign currencies determined at the time of issue); (2) enter into letter
of credit arrangements with one or more banks or such other agreements or arrangements as
maybe necessary or appropriate, from time to time, to provide additional credit support for the
payment of the principal of, the interest on, and the premium (if any) on such Debt; (3) enter into
one or more currency swaps; and (4) contribute or sell additional debt to special interest entities
(SPE) in an amount based upon the common securities of the SPE.
ORDER NO. 29787
Such authority would remain in effect until May 31 , 2010, so long as the Company
maintains a BBB- or higher senior secured debt rating, as indicated by Standard & Poor s Rating
Services, and a Baa3 or higher senior secured debt dating, as indicated by Moody s Investors
Service, Inc.
The Application states that the securities will consist of securities issued or
exchanged as public or private placements, domestically or overseas, in the form of secured or
unsecured debt, preferred securities or other indebtedness. The terms and interest rate for each
issue will be determined at the time of issuance. The Debt may have various maturities. The
issuance(s) may be at a fixed or variable interest rate based on LIBORt, the applicable prime
rate, or other established rate. Fees will be charged based on the type of security issued but are
estimated to average 1 % of the outstanding balance with some transactions carrying fees up to
5%.
PacifiCorp states that the requested financing authority will provide funds to
refinance $650 million of debt that matures over the next three years. The remainder will be
used for the following purposes: the acquisition or construction of new plant along with the
improvement or maintenance of existing generation, distribution, transmission and general plant
to provide or improve utility services; additional refunding of financing instruments; and
reimbursement of the treasury for other purposes.
PacifiCorp states that the current Application, providing for a variety of funding
options, is substantially similar to Applications granted in the past and the requested authority
would preserve the financing flexibility that the Commission has previously authorized. See e.
Order No. 29238 in Case No. P AC-03-6. PacifiCorp explains that the variety of borrowing
options sought would allow it the ability to select the debt instrument, market and maturity that
allows it to borrow at a lower all-in cost, consistent with its financial goals. The type of issue
and its terms including interest rate will be determined at the date of issue and the Company will
notify the Commission Staff of the terms as soon as practicable before the issue. The type
issue will be based on the all-in costs and benefits of the alternatives. Further, the Company
committed in Case No. P AC-99-3 to a cost test providing that foreign transactions will not be
utilized for ratemaking purposes unless and until the Company can assure that the all-in costs of
the foreign borrowing is no more than the all-in costs of similar borrowing.
1 LIBOR: London Interbank Offered Rates.
ORDER NO. 29787
If the Debt bears a fixed rate, the interest rate will be set at the time of issuance. If
the Debt bears a floating rate, the interest rate will be set periodically based upon a published or
quoted index. The Debt may be publicly or privately placed in the domestic or foreign markets.
Selection of the method of issuance and the location will depend on the relative all-in cost and
other benefits of the alternatives being considered.
The types of offerings contemplated by the Company in its Application include:
(1) Conventional first mortgage bonds placed publicly or privately in the
domestic or foreign markets;
(2) Secured or unsecured medium-term notes placed publicly or privately in
the domestic or foreign markets;
(3) Floating rate debt placed publicly or privately in the domestic or foreign
markets;
(4) Eurodollar financings placed publicly or privately overseas;
(5) Debt issued overseas denominated in, or based upon foreign currencies
combined with a currency swap to effectively eliminate the currency risk;
and
(6) Subordinated debt placed publicly or privately in the domestic or foreign
markets and issued either alone or in conjunction with an offering of
preferred securities by an SPE organized by the Company.
The Application recognizes that a foreign currency offering involves a degree of risk
to a U.S. issuer because changes in the relationship between the value of the U.S. dollar and
foreign currency may increase the ultimate cost of the debt. Currency swaps allow a party to
make a series of payments in U.S. dollars in exchange for a series of payments in, or based upon
foreign currencies. Combining a foreign currency offering with a currency swap effectively
eliminates the currency risk by providing the issuer a stream of foreign currency payments equal
to obligations of foreign debt.
STAFF REVIEW
Staff recommended approval of the shelf authority for the five-year period through
May 31 2010 with two additional conditions. Staff recommended that the Company (1) provide
Quarterly Financing Activity Reports and credit rating reports to the Commission and (2) notify
ORDER NO. 29787
the Commission of its intent to utilize a SPE and provide all details anticipated with the
transaction.
FINDINGS OF FACT
PacifiCorp was incorporated under Oregon law in August 1987 for the purposes of
(1) facilitating consummation of a merger with Utah Power Light Company, a Utah
corporation, and (2) changing the state of incorporation of PacifiCorp from Maine to Oregon.
The Company uses the assumed business name of Utah Power & Light within its service
territory in Idaho.
Based on the representations in the Application, we find that the net proceeds from
the authorized debt will be used for one or more of the utility purposes authorized by Idaho Code
9 61-901. We further find that the issuances of the Debt proposed are part of an overall plan to
finance the cost of the Company s facilities taking into consideration prudent capital ratios
earnings coverage tests and market uncertainties as to the relative merits of the various types of
securities the Company could sell.
The Company has paid the required fees required by Idaho Code 9 61-905.
CONCLUSIONS OF LAW
PacifiCorp is an electric corporation within the definition of Idaho Code 9 61-119
and is a public utility within the definition of Idaho Code 9 61-129. The Idaho Public Utilities
Commission has jurisdiction over this matter pursuant to Title 61 , Idaho Code, Chapters 1 and 9
specifically Idaho Code 99 61-119, 61-129, 61-901 , and 61-902, and IDAPA 31.01.01.141 -
150.
After examining the Applicatiqn and Staffs comments, the Commission finds that an
evidentiary hearing in this matter is not required and would serve no public purpose.
The Commission further finds that the Application requesting authority to (1) issue
and sell or exchange not more than $1 000 000 000 of debt, (2) enter into credit support
arrangements, (3) enter into currency swaps, and (4) contribute or sell additional debt to special
purpose entities is for a lawful purpose, is within PacifiCorp s corporate powers, and is generally
compatible with the public interest. The Commission further finds that the method of issuance is
proper.
This general approval of the general purposes to which the proceeds will be put is
neither a finding of fact nor a conclusion of law that any particular program of the Company
ORDER NO. 29787
which may be benefited by the approval of this Application has been considered or approved by
this Order, and this Order shall not be construed to that effect.
The issuance of this Order does not constitute agency determination/approval of the
type of financing or the related costs for ratemaking purposes, which determination the
Commission expressly reserves until the appropriate proceeding.
ORDER
IT IS HEREBY ORDERED that the Application of PacifiCorp requesting authority
to (1) issue and sell or exchange, in one or more public offerings or private placements, not later
than May 31 , 2010, fixed or floating rate debt (Debt) in the aggregate principal amount of not
more than $1 000 000 000 or, if such Debt is issued as an original issue discount, such greater
amount as shall result in an aggregate offering price of not more than $1 000 000 000 (or its
equivalent amount in, or based upon, foreign currencies determined at the time of issue); (2)
enter into letter of credit arrangements with one or more banks or such other agreements or
arrangements as may be necessary or appropriate, from time to time, to provide additional credit
support for the payment of the principal of, the interest on, and the premium (if any) on such
Debt; (3) and enter into one or more currency swaps is hereby granted.
IT IS FURTHER ORDERED that such authority will remain in effect until May 31
2010, so long as the Company maintains a BBB- or higher senior secured debt rating, as
indicated by Standard & Poor s Rating Services, and a Baa3 or higher senior secured debt rating,
as indicated by Moody s Investors' Service , Inc.
IT IS FURTHER ORDERED that if the Company s senior secured debt ratings fall
below the investment grade levels referenced in the above ordering paragraph (the
Downgrade ), PacifiCorp s authority to incur Debt as provided in this Order will not terminate
but instead such authority will continue for a period of 364 days from the date of the Downgrade
(the "Continued Authorization Period") provided that PacifiCorp:
(1) Promptly notifies the Commission in writing of the Downgrade; and
(2) Files a supplemental application with the Commission within seven (7)
days after the Downgrade requesting a supplemental order
Supplemental Order ) authorizing Idaho Power to continue to incur
Debt as provided in this Order, notwithstanding the Downgrade. Until
PacifiCorp receives the Supplemental Order, any Debt incurred or issued
by PacifiCorp during the Continued Authorization Period will become
ORDER NO. 29787
due or mature no later than the final date of the Continued Authorization
Period.
IT IS FURTHER ORDERED that PacifiCorp shall file with the Commission an
application seeking approval of any proposed contribution or sale by the Company of additional
debt to special purpose entities (SPE) before such an agreement may be deemed effective.
IT IS FURTHER ORDERED that PacifiCorp shall file with the Commission on a
quarterly basis debt reports including any debt authorized by this Order and all credit rating
agency reports related to PacifiCorp issued during the quarter.
IT IS FURTHER ORDERED that PacifiCorp shall file the following as they become
available:
1. The "Report of Securities Issued" required by 18 C.R. 934.10.
2. Verified copies of any agreement entered into in connection with the
Company s issuances of the Debt pursuant to this Order.
3. A verified statement setting forth in reasonable detail the disposition of
the proceeds of each sale and issuance made pursuant to this Order.
IT IS FURTHER ORDERED that nothing in this Order or any act or deed performed
in connection with this Order shall be construed to obligate the State of Idaho to payor guarantee
in any manner whatsoever any security authorized, issued assumed or guaranteed under the
provisions of this Order.
IT IS FURTHER ORDERED that this authorization is without prejudice to the
regulatory authority of this Commission with respect to rates, service, accounts, evaluation
estimates or determination of costs or any other matter which may come before the Commission
pursuant to itsjurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that the issuance of this Order does not constitute
acceptance of PacifiCorp s exhibits or other material accompanying this Application for any
purpose other than the issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in the Order (or in issues decided
by this Order) may petition for reconsideration within twenty-one (21) days of the service date of
this Order with regard to any matter decided in this Order and in this case. Within seven (7) days
ORDER NO. 29787
after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 99 61-626 and 62-619.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this /'
day of May 2005.
J~-
MARSHA H. SMITH, COMMISSIONER
ATTEST:
~AJ.
Je It D. Jewell
rrimission Secretary
O:P ACE0505 - kdp
ORDER NO. 29787