the film forum library tutorial contact

Bond Sale Benefits Ratepayers by Staff BPA Journal, September 2014

Energy Northwest and BPA took the first step in an effort that could save ratepayers as much as $1.8 billion in gross interest savings and restore up to $1.2 billion of BPA's U.S. Treasury borrowing authority through 2044.

Energy Northwest sold BPA-supported bonds on Aug. 5 to refinance approximately $321 million of outstanding regional cooperation debt previously issued by Energy Northwest and associated with two never-completed nuclear projects. This is the first of several potential bond sales that could lead to the refinancing of Energy Northwest nuclear assets and yield the savings mentioned above.

"This agreement offers unique opportunities for savings," said Nancy Mitman, BPA acting chief financial officer. "The net effect of refinancing through regional cooperation bonds is that both the weighted average interest rate and maturity of BPA's overall debt portfolio will be reduced over the life of the proposal, thereby lowering interest costs by hundreds of millions of dollars and increasing U.S. Treasury borrowing capacity for making much-needed investments in our infrastructure."

Regional cooperation debt refers to existing debt associated with the Columbia Generating Station in Richland, Wash., and the two unfinished nuclear projects. It serves as a regional financial resource, providing remarkable debt management opportunities to lower costs of power for the benefit of the Pacific Northwest.

Similar efforts in the past helped BPA preserve and restore approximately $2 billion in Treasury borrowing authority and saved approximately $500 million in interest under BPA's Debt Optimization Program.

The bond proceeds will be used to pay off Energy Northwest debt that is due to mature in 2014. The new bonds will be paid before BPA's existing regional power sales agreements end in 2028. The bond sale also allows Energy Northwest to extend regional cooperation debt that was due in 2014 into the period between 2025 and 2028, which more closely matches the expected useful lives of the Energy Northwest facilities.

The bond sale means that amounts recovered in BPA's rates to pay Energy Northwest principal will instead be available to pay off like amounts of more expensive federal debt. The new Energy Northwest regional cooperation bonds have a true interest cost of 3.17 percent. The resulting availability of additional amounts in the BPA fund will assist in the prepayment of BPA federal debt with interest rates of 7.15 to 7.19 percent. The present value of the interest savings to the region will be $135 million. The savings also will help BPA hold down rates in fiscal years 2016 and 2017.