February 24, 2006

Texas Hires Adviser for Planned Sale of American Electric Bonds

By Jim Polson Published in Bloomberg News / BusinessWire

— The Texas Public Utility Commission hired Saber Partners LLC as its adviser for the planned sale of as much as $1.48 billion of bonds by American Electric Power Co. to recover costs incurred as the state opened its electricity markets to competition.

New York-based Saber has advised the state on similar sales, commission spokesman Terry Hadley said in an interview. The commission approved the amount of cost recovery Feb. 16 and American Electric has said it may sell the bonds this year. Hadley said the company hasn’t yet submitted a financing proposal.

Texas law allows the commission to impose charges on customer bills that guarantee repayment so that utilities can borrow the money at the lowest possible rates, Hadley said. TXU Corp. and CenterPoint Energy Inc. are among utilities in the state that have already sold more than $4 billion of the surcharge-backed bonds, which carry the highest debt ratings because of the guarantee.

American Electric’s financial plans call for $1.2 billion to $1.3 billion from the sale of the bonds in the fourth quarter, Chief Financial Officer Susan Tomasky said in an investor call on Feb. 1. The Columbus, Ohio-based company’s debt is rated two rungs above junk status at Baa2 by Moody’s Investors and BBB by Standard & Poor’s.

Saber advised the Texas commission on $1.8 billion of bonds sold by Houston-based power distributor CenterPoint in December. The bonds received the highest credit ratings from Standard & Poor’s and Moody’s Investors Service. Moody’s rates CenterPoint’s senior unsecured debt one level below investment grade.

— Editor: Williams.

To contact the reporters on this story: Jim Polson in New York at (1) (212) 617-5293 or jpolson@bloomberg.net.
To contact the editor responsible for this story: Beth Williams in New York at (1) (212) 617-2307 or bewilliams@bloomberg.net.