Firm to set up storm bond program for Florida utilities

Friday, October 14, 2005

Firm to set up storm bond program for Florida utilities

By Kristi Swartz Palm Beach Post Staff Writer

— State utility regulators have hired a New York-based investment banking firm to help develop a program that would let Florida’s utilities pay for hurricane expenses by selling bonds.

Saber Partners LLC will be financial advisers and expert witnesses for establishing the bond-financing program and will help draft financing orders that would be needed to issue the bonds, regulators said Thursday.

Gov. Jeb Bush signed off earlier this year on a law that would allow power providers such as Florida Power & Light Co. to ask the Florida Public Service Commission for permission to issue bonds to pay for last year’s hurricane expenses, as well as build up a new reserve to pay for future storms.

FPL, the utility arm of Juno Beach-based FPL Group Inc. (NYSE: FPL, $44.19), has said it would consider the bond-selling route as one option. The utility spent nearly $1 billion last year restoring power after Hurricanes Charley, Frances and Jeanne.

FPL is recovering some of that money through a three-year surcharge of $1.68 a month on its 4.3 million household and business customers. The utility has not determined whether it will request a bond sale.

“It’s one more option that would be available to us to ensure that our customers get power restoration at the lowest possible cost,” said Pat Davis, an FPL spokeswoman.

PSC spokesman Todd Brown said regulators are organizing the program.

“Right now, we’re still in the midst of negotiating the contract with Saber, but we’re expecting filings from the utilities sometime in November,” Brown said.

Under the financing program, a special charge would be placed on consumers’ monthly bills. The utility can adjust the amount to any level, subject to the PSC’s approval, to assure that the bonds will be paid off on time.

“Our main objective is to ensure the cost of the bonds, including issuance costs, are reasonable,” he said.

Saber Partners, which has set up similar programs in New Jersey, Texas and Wisconsin, responded to the PSC’s August request for financial advisers to assist with the securitization process, Chief Executive Joseph Fichera said Thursday.

Saber supports having utilities sell bonds “if they are properly structured to protect the ratepayers,” Fichera said.

In its formal request, the PSC said it would pay financial advisers in senior management $250 an hour for their assistance. Other professionals would be paid $200 an hour.

St. Petersburg-based Progress Energy-Florida has already told the PSC it wants to sell about $500 million in bonds. Gulf Power Corp., which serves the Panhandle, would be able to finance its storm fund through bonds as part of an agreement with the Office of Public Counsel, which represents consumers in utility matters.