HomeMy WebLinkAbout28240.docBEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
PACIFICORP FOR (1) AUTHORITY TO ISSUE
AND SELL OR EXCHANGE NOT MORE THAN
$1,600,000,000 OF DEBT, (2) AUTHORITY TO
ENTER INTO CREDIT SUPPORT
ARRANGEMENTS, (3) AUTHORITY TO
ENTER INTO CURRENCY EXCHANGES, AND
(4) CONTRIBUTE OR SELL ADDITIONAL
DEBT TO SPECIAL PURPOSE ENTITIES.
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CASE NO. PAC-E-99-3
ORDER NO. 28240
On November 9, 1999, PacifiCorp filed an Application requesting an order authorizing the Company to generally issue, or exchange security instruments. In its Application, the Company sought approval to: (1) issue and sell or exchange, in one or more public offerings or private placements, not later than November 1, 2001, fixed or floating rate debt (Debt) in the aggregate principal amount of not more than $1,600,000,000 or, if the Debt is issued at an original issue discount, such greater amount as shall result in an aggregate offering price of not more than $1,600,000,000 (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 the Debt; and (3) enter into one or more currency exchanges. The Company also requested approval of the proposed contribution or sale of additional Debt to special purpose entities (SPE) in an amount based upon the common securities of the SPE and Commission approval of the proposed guarantee and expense payment agreements relating to the preferred securities of the SPE. After reviewing the Application, the Commission grants the Company’s request.
FINDINGS OF FACT
I
The Company was incorporated under Oregon law in August 1987 for the purpose of facilitating consummation of a merger with Utah Power & Light Company, a Utah corporation, and changing the state of incorporation of PacifiCorp from Maine to Oregon. The Company uses the assumed business names of Pacific Power & Light Company and Utah Power & Light Company within their respective service territories located in the states of California, Idaho, Oregon, Utah, Washington and Wyoming. Approximately 99 percent of the Company's retail utility revenues in 1998 were derived from its electric operations and approximately 6 percent of those revenues were derived from its Idaho operations.
II
The Company proposes to issue or exchange the Debt from time to time not later than November 1, 2001, in either public offerings or private placements, domestically or overseas. The financial markets have become more internationalized in recent years, and as such, foreign sources of capital compete directly with domestic sources for investment opportunities. The Company finds that the variety of borrowing options available to it dictate that it have 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.
III
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 at the option of the Company based upon a published or quoted index of short-term rates. 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.
IV
The types of offerings contemplated by the Company in its application include:
a. Conventional first mortgage bonds placed publicly or privately in the domestic or foreign markets;
b. Secured or unsecured medium-term notes placed publicly or privately in the domestic or foreign markets;
c. Floating rate debt placed publicly or privately in the domestic or foreign markets;
d. Eurodollar financings placed publicly or privately in Europe or Japan;
e. Debt issued overseas denominated in, or based upon, foreign currencies combined with a currency exchange to effectively eliminate the currency risk; and
f. 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.
First mortgage bonds have been the traditional debt financing vehicle utilized by utilities in the United States. First mortgage bonds are secured by a mortgage on the fixed assets of the utility. Utilities historically issued first mortgage bonds with maturities of up to 30 years, although longer maturities became more common as interest rates decreased in recent years. The Company's first mortgage bonds are issued as First Mortgage Bonds under the PacifiCorp Mortgage. The Commission has previously authorized the Company to incur the lien of the PacifiCorp Mortgage in Case No. U-1046-15, Order No. 22157.
Medium-term notes are interest bearing instruments with maturities generally longer than 9 months. Medium-term notes are typically offered on a continuous basis by the borrower through one or more managers which act as agents in placing the notes, either domestically or through global programs. Medium-term notes can be offered on a secured or unsecured basis. If the Company issues secured medium-term notes, they will most likely be issued in the form of First Mortgage Bonds under the PacifiCorp Mortgage.
Floating rate debt is a dollar-denominated security that is typically unsecured (i.e., term loan agreement) with interest rates that reset daily, weekly, monthly, quarterly, semi-annually or annually at the option of the Company. The most common indices used for pricing floating rate debt are based upon London Interbank Offered Rates (LIBOR), commercial paper and Treasury bills.
Eurodollar bonds or debentures are dollar-denominated securities issued to European or Japanese investors. Eurodollar securities are generally placed by a foreign underwriter, or a foreign subsidiary of a U.S. investment or commercial bank. Eurodollar securities are generally unsecured obligations. However, the Company may be required to enter into a letter of credit arrangement with one or more banks or such other agreements or arrangements as may be necessary or appropriate, from time to time, to support its obligation to repay the principal of, the interest on, and the premium (if any) on the Debt. The Company estimates that such an arrangement could involve a fee not expected to exceed one percent on the principal amount of the Debt.
Foreign currency debt is debt denominated in a currency other than U.S. dollars. The foreign currencies most frequently used in the past by U.S. companies include Swiss Francs, Deutschemarks, British Sterling, Dutch Guilders, Japanese Yen, Canadian Dollars, Australian Dollars and New Zealand Dollars.
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 exchanges 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 exchange effectively eliminates the currency risk by providing the issuer a stream of foreign currency payments equal to obligations on the foreign debt.
Subordinated debt would be issued in one or more series pursuant to the Company's Indenture dated as of May 1, 1995, as supplemented, or pursuant to a new indenture. The Company may issue the subordinated debt: (1) directly to investors as in the issuance and sale of its 8 3/8% Junior Subordinated Deferrable Interest Debentures, Series A, pursuant to Case No. PAC-S-94-2; (2) in exchange for its outstanding securities as in the issuance of its 8.55% Junior Subordinated Deferrable Interest Debentures, Series B, pursuant to Case No. PAC-S-95-1; or (3) to a special purpose entity in support of the preferred securities of the SPE as in the issuance and sale of its 8 1/4% Junior Subordinated Deferrable Interest Debentures, Series C, pursuant to Case No. PAC-S-96-2, and its 7.70% Junior Subordinated Debentures Series D, pursuant to Case No. PAC-E-97-2.
It is anticipated that the Company will guarantee the SPE’s payment of: (1) any accumulated and unpaid distributions required to be paid on the preferred securities of the SPE to the extent that the SPE has funds on hand available therefor; (2) the redemption price with respect to any preferred securities called for redemption to the extent that the SPE has funds on hand available therefor; and (3) upon a voluntary or involuntary dissolution, winding-up or liquidation of the SPE (unless the Company’s subordinated debt is distributed to holders of the SPE’s preferred securities), the lesser of (a) the aggregate of the liquidation preference and all accrued and unpaid distributions to the date of payment and (b) the amount of assets of the SPE remaining available for distribution to holders of the preferred securities. The guarantee is expected to be directly enforceable by holders of the preferred securities issued by the SPE and subordinate to all senior debt of the Company. It is also anticipated that the Company and the SPE will enter into an expense reimbursement arrangement under which the Company will agree to pay the expenses of the SPE.
V
The Company expects to issue or exchange the Debt from time to time not later than November 1, 2001, in either public offerings or private placements. The Debt may have various maturities, although medium-term notes generally have maturities longer than 9 months.
VI
Offering costs are not expected to exceed 3.15% for the Debt.
VII
The expected results of the offering and sale of the Debt are as follows:
ESTIMATED RESULTS OF THE FINANCINGS
ESTIMATED RESULTS OF THE OFFERING (1)
Total Percent of Total
Gross Proceeds $1,600,000,000 100.00%
Less: Agents/Underwriters
Compensation (1) 50,400,000 3.15%
Proceeds Payable to Company $1,549,600,000 96.85%
Less: Other Issuance Expenses 1,600,000 .10%
Net Proceeds $1,548,000,000 96.75%
(1)Assumes the issuance of junior subordinated debt securities.
VIII
The net proceeds of the issuances will be used for one or more of the utility purposes authorized by Idaho Code § 61 901. To the extent that any funds to be reimbursed were used for the discharge or refunding of obligations, those obligations or their precedents were originally incurred in furtherance of a utility purpose.
IX
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.
X
The Company has paid the fees required by Idaho Code § 61 905.
CONCLUSIONS OF LAW
PacifiCorp dba Utah Power & Light is an electrical corporation within the definition of Idaho Code § 61 119 and is a public utility within the definition of Idaho Code § 61 129.
The Idaho Public Utilities Commission has jurisdiction over this matter pursuant to the provisions of Idaho Code § 61 901 et seq., and the Application reasonably conforms to Rules 141 through 150 of the Commission's Rules of Procedure, IDAPA 31.01.01.141-150.
The method of issuance is proper.
The general purposes to which the proceeds will be put are lawful purposes under the Public Utilities Law of the State of Idaho and are compatible with the public interest. However, 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 construction program of the Company 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 an Order authorizing the proposed financing 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.
The Application should be approved.
O R D E R
IT IS THEREFORE ORDERED that PacifiCorp’s Application for authority to: (1) issue and sell or exchange, in one or more public offerings or private placements, not later than November 1, 2001, fixed or floating rate debt (Debt) in the aggregate principal amount of not more than $1,600,000,000 or, if the Debt is issued at an original issue discount, such greater amount as shall result in an aggregate offering price of not more than $1,600,000,000 (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 the Debt; and (3) enter into one or more currency exchanges, is granted.
IT IS FURTHER ORDERED that the proposed contribution or sale by PacifiCorp of additional Debt to special purpose entities (SPE) in an amount based upon the common securities of the SPE and the proposed guarantee and expense payment agreements relating to the preferred securities of the SPE, in each case substantially as described in the Company’s application, is approved.
IT IS FURTHER ORDERED that the unused authorities under Case No. PAC-S-96-1, Order No. 26393 as amended, is replaced by the authorities granted in 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, valuation, estimates, or determination of costs, or any other matter that may come before this Commission pursuant to this jurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that nothing in this Order and no provision of Chapter 9, Title 61, Idaho Code, or any act or deed done or performed in connection with this Order shall be construed to obligate the State of Idaho to pay or guarantee in any manner whatsoever any security authorized, issued, assumed, or guaranteed under the provisions of Chapter 9, Title 61, Idaho Code.
IT IS FURTHER ORDERED that PacifiCorp notify the Commission as soon as possible prior to the issuance with as much information as possible on the issue. The notice may be by telephone or facsimile to be followed with letter of verification if notice is less than seven days.
IT IS FURTHER ORDERED that PacifiCorp shall file the following as they become available:
a. The "Report of Securities Issued" required by 18 C.F.R. § 34.10.
b. Verified copies of any agreement entered into in connection with the issuance of Debt pursuant to this order.
c. A verified statement setting forth in reasonable detail the disposition of the proceeds of each offering made pursuant to this order.
IT IS FURTHER ORDERED that issuance of this Order does not constitute acceptance of PacifiCorp's exhibits or other material accompanying the Application for any purpose other than the issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally decided by this Order) or in interlocutory Orders previously issued in this Case No. PAC-E-99-3 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 or in interlocutory Orders previously issued in this Case No. PAC-E-99-3. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of December 1999.
DENNIS S. HANSEN, PRESIDENT
MARSHA H. SMITH, COMMISSIONER
PAUL KJELLANDER, COMMISSIONER
ATTEST:
Myrna J. Walters
Commission Secretary
O:pace993_dh/tc
ORDER NO. 28240 1
Office of the Secretary
Service Date
December 22, 1999