20181116Decision Memo.pdf

DECISION MEMORANDUM
TO COMMISSIONER ICIELLANDER
COMMISSIONER RAPER
COMMIS SIONER AI{DERSON
COMIVtrSSION SECRETARY
LEGAL
WORKING FILE
FROM:JOSEPH TERRY
TERRI CARLOCK
DATE: NOVEMBER 15,2018
RE:PACrI'ICORP'S SHELF AUTHORTTY REQUEST OF $2 BTLLLION
DEBT; CASE NO. PAC-E-18-10.
BACKGROUND
On October 23,2018, PacifiCorp filed an Application requesting authority to incur debt
up to $2,000,000,000 aggregate principal amount at any one time. PacifiCorp also requests
authority to enter into letter of credit arrangements to provide additional credit support.
PacifiCorp requests this additional authority remain in effect through Sept 30, 2023 so long as
the Cornpany's bond rating for senior secured debt remains 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 curent secured debt ratings are A* by S&P
and A1 by Moody's.
The requested authority will amend and supersede Order No. 33083 (Case No.
PAC-E-I7-05). Under current authority the Company has issued $850 million in debt, including
$600 million issued in July of 2018. The remainingS4T2 million is not anticipated to be utilized,
and will be replaced with this request if granted. The securities will be issued in one or more
tranches and will consist of securities issued or exchanged as public or private placements in the
form of secured or unsecured debt. The maturity, other terms, and interest rate for each issue
will be determined at the time of issuance. The issuance(s) may be at a fxed rate set at the time
ofissuance or variable interest rate based on a published index ofshort-term rates such as
Treasury bills, commercial paper, or LIBOR. Fees will be charged based on the type of security
issued, but are not expected to exceed l% of the outstanding balance. Any F'irst Mortgage Bonds
DECISION MEMORANDUM I NOVEMBER 15,2018
will be issued under the PacifiCorp Mortgage. The Commission has previously authorizedthe
Company to incur the lien of the PacifiCorp Mortgage in Case No, U-1045, OrderNo.22157.
The variety of funding options requested will allow the Company to evaluate the all-in cost of
each option after considering all associated fees so the issuances result in lowest cost issuances.
The requested financing authority will provide funds for one or more utility purposes.
These include the acquisition of property; the construction, completion, extension or
improvement of utility functions; the improvement of service; the discharge or lawful refunding
of obligations which were incurred for utility puposes; or the reimbursement of the Company's
reasury for funds used for the foregoing purposes.
The Company's Application Fee in the amount of $1,000 was being submitted under a
separate cover. Staffconfirmed that thc Commission received the Application Fee in the
appropriate amount.
STAFF RECOMMENDATION
Stafflrecommends the approval of the shelf authority of $2 Billion debt for the period
through Sept 30, 2023. ^the Company's prior commitments since Case No, PAC-E-99-03 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 costs of similar
domestic borrowings.
The commitments and terms from prior cases, up to and including Case No,
PAC-E-14-05, Order No. 33083 remain in effect. This includes, but is not limited to, that
PacifiCorp's senior secured debt rating will remain at investment grade and will follow the
established procedure of notification if the ratings are downgraded; and PacifiCorp will file
quarterly financing activity reports and credit rating reports, to the extent that they are not filed
with the MEHC Acquisition Case (Case No. PAC-E-05-08, Order No. 29998).
DECISION MEMORANDUM -2-NOVEMBER 15,20I8
COMMISSION DECTSION
Should the $2 Billion shelf authority for debt be approved?
Should the authority be approved through Sept. 30, 2023 \ith the existing terms and
conditions including rnaintaining the investnent grade rating, continuing the additional reporting
requirements, providing the anticipated details of the transaction, and meeting the all-in cost test
commitment?
Terry
Udmemos,,?AC-E-l 8- I 0 Deoision Memo
DECISION MEMORANDUM -3-NOVEMBER 15,20I8