February 9, 2006
West Virginia Regulators Hire Adviser for Allegheny Bonds
By Jim Polson, Published in Bloomberg News
— West Virginia’s Public Service Commission hired Saber Partners LLC as its adviser for the planned sale of $340 million in bonds by Allegheny Energy Inc. to finance pollution controls at a coal-fired power plant.
Allegheny proposed the sale under legislation passed in West Virginia last year, Saber said yesterday in a statement. The debt will finance sulfur-dioxide removal equipment known as scrubbers at Allegheny’s fourth-largest power plant, located in the state at Fort Martin.
The company expects to sell the bonds at an interest rate lower than it would pay on conventional corporate debt because lenders will be guaranteed repayment by a state-mandated charge on customer bills, New York-based Saber said. Allegheny’s credit is rated one level below investment grade by both Moody’s Investors Service and Standard & Poor’s. Utilities in Texas and other states have used similar financing.
The adviser’s role will be to assure the bonds are sold at the lowest possible cost to Allegheny’s electricity customers, closely held Saber said. Allegheny’s Monongahela Power unit sold 15-year bonds backed by a first mortgage on utility assets at a 5.375 percent interest rate in October.
The West Virginia commission must decide on the scrubber proposal and related financing by April 7, Allegheny spokesman Allen Staggers said in an interview today. Subject to approval, the bonds may be sold by year-end, he said.
Allegheny plans to sell bonds of maturing in 15 years, Staggers said.
The Fort Martin plant can generate 1,107 megawatts, enough power for 885,600 average U.S. homes, based on U.S. Energy Department statistics.