20080115Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
CO MMISSI 0 NER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:JANUARY 14,2008
RE:P ACIFICORP'S SHELF AUTHORITY REQUEST OF $2 BILLION DEBT;
CASE NO. PAC-07-16.
On December 18 2007, 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, 2013 so long as the Company s bond
ratings for senior secured debt remains investment grade (BBB- or higher by Standard & Poor
Rating Services and Baa3 or higher by Moody s 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).
The requested authority will supplement the financing flexibility previously authorized in
Case No. PAC-07-, Order No. 30258, approving a $1.5 Billion authority and increase the
authority by $500 Million. Under the current authority, $1.2 Billion has been issued. The
remaining $300 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be withdrawn if the Commission so orders.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 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 rate based on LIB OR, the
applicable prime rate, or other established rate. Fees will be charged based on the type of
security issued but are expected to average 1 % - 3% of the outstanding balance with some
transactions carrying fees up to 3.15%. The variety of funding options will allow the Company
to evaluate the all-in cost of each to borrow at lower costs.
DECISION MEMORANDUM - 1 -JANUARY 14 2008
The requested financing authority will provide funds for one or more utility purposes.
These include capital requirements for the following purposes: redemption of approximately
$550 Million debt, redemption of preferred stock, 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, 2013. 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 Case Nos. PAC-07-2 and PAC-05-
Order Nos. 30258 and 29787 remain effective. As a condition of this authority, PacifiCorp
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.
CO MMISSI 0 N D ECISI 0 N
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 provide the anticipated details of the
transaction, meeting the all-in cost test commitment for foreign transactions?
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Terri Carlock
TC\pace07.16 Debt 2B.DM 1.14.
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DECISION MEMORANDUM - 2 -JANUARY 14 2008