In the News: Recent Developments

Securitization Problems and Issues Hurting Ratepayers Upcoming Call

Second Assignment 2015-16: $1.294 Billion: The Nation’s First Nuclear Asset-Recovery Bond

(Duke Energy, NYSE: DUK)

Saber Partners, LLC served as financial advisor to the State of Florida, Florida Public Service Commission (“FPSC”). We analyzed Duke Energy Florida’s petition requesting an irrevocable Financing Order to issue Nuclear Asset-Recovery Bonds, pursuant to  a new law: Section 7 of the special legislation (view here CS/HB 7109). Saber Partners, LLC reviewed the petition, provided under-oath expert witness testimony on securitization “best practices,” assisted in negotiations with a settlement with Duke Energy Florida and the preparation and implementation of the approved Financing Order.  We also oversaw the structuring, marketing and pricing of the subsequent bond offering to ensure that it achieved the lowest possible cost to ratepayers in accordance with ‘best practices”.

Saber’s expert witness testimony (see links below) led to  the issuance of $1.294 Billion Duke Energy Florida Project Finance LLC in five series with the longest maturity of bonds issued in this sector.  The bonds were the first-ever issuance of Nuclear Asset-Recovery Bonds.  Proceeds were used to refinance the costs associated with the early retirement of a nuclear plant. Saber ensured that the bonds were timely and efficiently issued.  Our work resulted in the lowest nuclear asset-recovery charges consistent with prevailing market conditions and the terms of the Financing Order which authorized the issuance.

Important Precedent

According to the industry press, “Duke Energy Florida [structured and] marketed its $1.3 billion securitization of utility fees as a corporate bond, and the strategy appears to have paid off. The deal was priced last week at interest rates in line with those of some the highest rated U.S. companies and government agencies.”  For the first time ever, the bonds were included in the Bloomberg-Barclays Corporate Bond Index.  This one achievement vastly expanded the market of investors for the securities. The duration-adjusted cost of funds was 2.72% on June 15, 2016.  This interest rate was the lowest-ever achieved for similar IOU transaction of this size and duration in the entire investor-owned utility bond market.

See the FPSC Meeting discussing Saber’s successful results on $1.294 Billion financing.

Full FPSC/DUK Docket (#20150171) and Chronology of the Transaction:

Saber Partners’ Under -Oath Testimony on Behalf of Florida Public Service Commission Staff on Securitization/ Ratepayer-Backed Bond “Best Practices:”

Bond Pricing Results (achieving  a certified “lowest cost financing”) of Duke Energy Florida Project Finance, LLC, on June 15, 2016, the date of pricing:

See the Florida Commission’s RPP (Request for Proposal) with the  RFP “Evaluation Chart” of Submitted Proposals

First Assignment 2006-07: $652 Million Assignment: Nation’s First Hurricane Recovery Bonds

(Florida Power & Light, NYSE: NEE)

Saber Partners, LLC provided financial advisory and expert witness services to the FPSC with respect to proposals to issue storm/hurricane-recovery bonds by the state’s investor-owned electric utilities. This was the first use of securitization to pay for hurricane damage and other costs in order to protect ratepayer interests while recognizing the needs of the utilities for certainty of recovery.

As financial advisor, Saber Partners assisted the FPSC with analyzing petitions requesting recovery of hurricane-recovery costs through securitization, preparing and implementing any financing orders, and reviewing the subsequent issuance of storm recovery bonds to ensure compliance with Section 366.8260, Florida Statutes, and the irrevocable financing order.

The hurricane-recovery bonds were issued to recoup current hurricane-recovery expenses, and/or to replenish storm recovery reserves in the event of future storm damage.

See the FPSC Financing Order dated May 30, 2006 (Docket No. 060038-EI; Order No. PSC-06-0464-FOF-EI) clarified in other respects on July 21, 2006.

See the “Issuance Advice Letter” to view the summary of the transaction submitted by FPL.

Full FPSC/FPL Docket (#20060038) that Details the Chronology of the Transaction:

View Saber Partners’ Under-Oath Direct Testimony on Behalf of Staff before the FPSC: