Industry Brief
The joint powers authority financing arm for public power in Southern California received an “AA-” credit rating for its $511.5 million revenue bonds to fund an aggressive long-term natural gas purchase program for five munis, including the Los Angeles Department of Water and Power (LADWP). Fitch Ratings gave the offering a stable outlook. Southern California Public Power Authority (SCPPA) will use the proceeds to acquire a 30-year natural gas supply from J. Aron & Co., including five nearly identical prepaid gas sales agreements with the SCPPA municipal utilities involved. The bonds are expected to be priced soon with Goldman Sachs as the sole manager, Fitch said. As the tax-exempt intermediary in the deal, SCPPA will sell the gas to the five electric munis at a price Fitch described as being equal to the first-of-the-month market index minus a fixed discount pursuant to nearly identical gas supply agreements with each project participant. “The price risk between the prepaid [fixed] price of natural gas paid by SCPPA to J. Aron at the bond closing and the index price that will be received by SCPPA from the project participants over the next 30 years will be hedged by a commodity swap between SCPPA and AIG-FP Broadgate, as described elsewhere,” Fitch said. “In addition, SCPPA will enter into an interest rate swap with J. Aron.
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