20060310Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:MARCH 10, 2006
SUBJECT:ACIFICORP REQUESTED SHORT-TERM DEBT AUTHORITY
OF $1.5 BILLION; CASE NO. PAC-06-
RECOMMEND:APPRO V
PacifiCorp requests authority to borrow not more than $1.5 billion in short-term debt
aggregate principal amount through April 30, 2011. The authority would extend the existing
short-term debt authority that expires April 30, 2006, Order No. 29374 (prior authorities Order
Nos. 27457 28346 and 28970). The term will increase from the traditional2-year period to an
additional 5-year period. As a condition for the longer time period, PacifiCorp s senior secure
debt must maintain a credit rating by both Standard & Poor s Rating Services and Moody
Investor Services, Inc. that is "investment grade . The other terms and conditions will not be
changed.
The type of issue (promissory notes, revolving credit, commercial paper) and the terms of
issue including interest rate will be determined at the date of issue. The short-term debt may
include (1) unsecured short-term promissory notes to and borrow from u.s. or foreign commercial
banks (or their affiliates) under the following facilities: (a) not more than $1.5 billion in aggregate
principal amount outstanding at anyone time under one or more revolving credit agreements
(Agreements); and (b) not more than $1.5 billion in aggregate principal amount outstanding at any
one time under other borrowing arrangements (Other Arrangements); and (2) commercial paper
(Paper) in the u.S. or overseas in an aggregate principal amount not to exceed $1.5 billion
outstanding at anyone time; provided, further, that the aggregate principal amounts outstanding
under the Agreements, Other Arrangements and Paper not exceed $1.5 billion at anyone time.
DECISION MEMORANDUM MARCH 10, 2006
Proceeds from the debt issuances will be utilized for general utility purposes including
improvement or maintenance of service or facilities, construction purposes, acquisition of utility
property, discharge or refunding of existing issuances or to reimburse the Company s treasury.
STAFF DISCUSSION AND RECOMMENDATION
PacifiCorp requests the short-term debt authority be continuous and remain effective
through April 30, 2011. As a condition to obtain the longer 5-year term, the credit rating
condition was discussed with the terms agreed to by PacifiCorp and the Staff. The requested
authority (if approved) would remain in effect through April 30, 2011 , so long as PacifiCorp
maintains a BBB- or higher senior secured debt rating by Standard and Poors ' Rating Services
and a Baa3 or higher senior secured debt rating by Moody s Investors' Service , Inc.
IfPacifiCorp s senior secured debt ratings fall below the investment grade levels
referenced in the above paragraph (the "Downgrade ), it is recommended that PacifiCorp
authority to incur Debt not terminate, but instead such authority will continue for a period of 180
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 PacifiCorp 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
due or mature no later than the final date of the Continued Authorization
Period.
Currently PacifiCorp s ratings for Senior Secured Debt are "A3" by Moody s and "" by
Standard & Poors . For Commercial Paper the ratings are "P2" by Moody s and "A2" by
Standard & Poors . I recommend the authority be granted. The reasonableness of the interest
rate and all-in-cost will be evaluated as part of the review of issuance documents in this case and
in future audits.
DECISION MEMORANDUM MARCH 10, 2006
COMMISSION DECISION
Should authority to borrow $1.5 billion in short-term debt be approved through
April 30, 2011?
Should the credit rating condition requiring "investment grade" for senior secured debt be
adopted?
0vu~ GuJo
Terri Carlock
i:udemos/paceO6.1dec mem
TC/P AC/paceO60 1
DECISION MEMORANDUM MARCH 10, 2006