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Long Island Power Authority restructures $2.1 billion in debt


From the December 16, 2013 issue of Public Power Daily

Originally published December 16, 2013

By Jeannine Anderson
Editor

The Long Island Power Authority said Dec. 13 that it successfully completed a major refinancing — $2.138 billion of its outstanding debt — at significantly lower interest rates. It is the first ever "AAA" rated deal for a municipal utility, the New York utility said.

The transaction, known as securitization, allows LIPA to replace some of its debt with higher quality and, therefore, less expensive debt that is secured by a separate charge to be recovered from LIPA’s customers on their regular utility bills. Securitization, authorized as part of the recent LIPA Reform Act passed by the New York Legislature, will reduce the amount of debt held by Long Island utility. It is a first deal of its kind for a municipal utility, LIPA said.

"We are very pleased with the overwhelming amount of investor interest," said LIPA Chief Financial Officer Michael Taunton. "This securitization deal allows us to strengthen our financial health, reduce debt service costs, and reinvest the savings achieved back into the business with the overall goal of providing superior customer service, maintaining top reliability in the state, and continuing to be among the leaders in the area of energy efficiency and renewable energy."

The Utility Debt Securitization Authority (UDSA), a separate state entity, was created by the state Legislature to issue the AAA-rated bonds, and will collect the financing costs via a separate charge on utility bills. LIPA will reduce its own charges by an equal amount so that there will be no increase to customers' bills. The UDSA was created solely to hold the securitized debt and will engage in no other commercial activities, LIPA said.

Repayment of the securitization bonds is scheduled to begin in March 2014.  The bonds will be repaid over their life, as a separate cents-per-kilowatt-hour charge on the bill that will be set initially at 1.25 cents per kWh. The charge will be reset in January 2015, and reviewed every six months thereafter, to recover exactly the amount needed to meet the UDSA obligations for each period, LIPA said.

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