Sept 12, 2005
New Jersey Utility PSE&G Sells Bonds Backed by Electric Bills
By Andrew Pratt
Public Service Electric & Gas Co., New Jersey’s largest utility, sold $102.7 million of bonds on Friday to finance costs related to the deregulation of the state’s electricity market.
The utility sold bonds maturing in two, five, 7.5 and 9.2 years, said Joseph Fichera, who negotiated the transaction on behalf of the New Jersey Board of Public Utilities. The bonds are backed by a state pledge to allow electricity rate increases whenever needed to pay investors.
Bonds maturing in two years were priced to yield 5 basis points less than an interest-rate swap index based on the London interbank offering rate, a European benchmark, said Fichera, chief executive officer of Saber Partners Inc. Five-year bonds were priced to yield 1 basis point lower than the index, while the 7.5- year and 9.2-year bonds were priced to yield 4 basis points and 7 basis points above the index, respectively, Fichera said. A basis point is 0.01 percentage point.
The bonds are rated AAA by both Standard & Poor’s and Moody’s Investors Service, the top rating. Credit Suisse First Boston, Barclays Capital and MR Beal were the bond underwriters.
Utilities have sold $33.5 billion in similar “transition bonds” since 1997, Fichera said in a statement.
New Jersey’s bonds were sold to pay the costs of buying electricity at higher prices than regulators allowed it to charge customers after deregulation.