February 8, 2006
Saber Partners Hired by West Virginia to Protect Ratepayers in Allegheny Power Environmental Facilities Financing
(New York) The State of West Virginia’s Public Service Commission has retained New York-based investment banking boutique, Saber Partners, as its financial advisor. The Commission selected Saber through a process that included such other firms as JP Morgan and Bear Stearns. Saber will advise the Commission on protecting ratepayer interests in bond financings for environmental control facilities by two of the State’s largest investor-owned utilities, Monongahela Power Company and the Potomac Edison Company, wholly-owned subsidiaries of Allegheny Power (NYSE:AYE).
“Saber Partners has the technical expertise, depth of experience, integrity and freedom from potential conflicts of interest that the Commission needs to oversee these financings if they are approved” said Richard Hitt, General Counsel of the West Virginia Commission. “Saber’s track record in similar transactions in other states impressed us and was solid evidence that Saber’s activist approach is effective in protecting ratepayer interests” he added.
The proposed financing is the result of legislation passed last year by the West Virginia legislature. It authorized the Commission to permit bond sales backed by a special charge on consumer electric bills and guaranteed by the State’s regulatory authority in order to pay for certain pollution control facilities at power plants. Monongahela Power Company and the Potomac Edison Company have applied to the State for approximately $340 million in bonds. Saber is to ensure the lowest possible financing costs to consumers.
The West Virginia financing is part of a developing trend nation-wide to lower electricity rates by raising investment capital thru this type of bond. The bonds special structure receives the highest credit rating in the capital markets and therefore has the best chance of achieving the lowest possible borrowing costs to consumers. The bonds are not a general obligation of the utility or state but depend on electricity sales and the guarantee of regulatory action granted in the special legislation.
West Virginia’s bonds will be for environmental facilities comparable to a proposed financing by the state of Wisconsin’s largest utility, Wisconsin Electric. Meanwhile, the State of Florida is considering an application from its largest utility, Florida Power & Light, to issue $1 billion of similar bonds for hurricane related recovery costs. And, the State of Idaho passed legislation last year allowing bonds to be sold for any traditional utility purpose. Approximately $33 billion of similar bonds have been sold to date in nine other states for purposes not related with environmental costs or hurricane recovery
“This is an innovative solution to a difficult problem. In today’s market, apart from U.S. Treasuries, bonds like these are the most secure investment available.” said Joseph Fichera, CEO of Saber Partners. We’re honored to play an important role in 5 states in ensuring the lowest cost to consumers in these financings.”
In addition to West Virginia, Saber Partners has served as the financial advisor to state commissions in Wisconsin, Florida, Texas and New Jersey. Since 2001, based on data from Securities Data Corporation, Mr. Fichera and Saber Partners have overseen the issuance of about $5 billion of the bonds in 6 separate transactions. According to industry observers, each transaction was the lowest cost financing compared to market benchmarks of any previous financing.
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