Debt Restructuring Initiative Reaches Milestone
ORLANDO, Fla., August 13, 2008 – Florida Municipal Power Agency (FMPA) announced today it has reached a milestone in its initiative to restructure the Agency’s debt portfolio. The FMPA Board of Directors and Executive Committee have now approved all financial transactions necessary to eliminate the use of auction-rate securities and increase the percentage of FMPA’s debt in fixed-rate securities.
“We are pleased to be able to report to FMPA’s members and to our investors that we have made substantial progress on restructuring $1.3 billion of the Agency’s debt portfolio,” said FMPA General Manager and CEO Roger Fontes. “We appreciate our bondholders’ continued patience and support during this transition in the financial markets.”
FMPA’s debt restructuring may be completed as soon as September or October 2008.
FMPA has historically included innovative debt structures in its portfolio to reduce debt service costs and increase financing flexibility, with the ultimate goal of reducing costs for its ratepayers. One type of variable-rate debt instrument, known as auction-rate securities, comprises a large portion of the Agency’s current debt portfolio. Auction-rate bonds are those with interest rates that are determined by open-market competitive bidding, which typically occurs every seven, 28 or 35 days. When there are not enough new investors, the auction does not clear and existing bondholders who wanted to sell must hold the securities. Interest rates after non-clearing auctions are set at a level described in Official Statements issued at the initial bond sale. (Detailed information about these securities and their terms and conditions can be found in the Official Statements for each bond issue. Bondholders who wish to obtain a copy of the Official Statements can contact Janet Davis or Edwin Nunez at FMPA.)
U.S. financial markets are experiencing a crisis of liquidity and credit. The market for these auction-rate securities no longer offers the liquidity that investors and issuers, like FMPA, were accustomed to in the past. Non-clearing auctions are now commonplace throughout the market. This has increased interest costs on all of FMPA’s auction-rate securities, prompting the Agency and its Board of Directors to take action.
FMPA’s Board of Directors and Executive Committee voted on March 27, 2008, to authorize the elimination of auction-rate securities from the Agency’s debt portfolio and to achieve a goal of having between 50% and 60% of FMPA’s total debt in fixed-rate obligations.
The Agency’s staff and financial advisor are moving rapidly to implement the Board’s direction. FMPA’s debt portfolio has many series of auction-rate securities, so the process of exiting the auction-rate market may last through approximately September or October 2008.
FMPA’s Board of Directors approved on July 18 three fixed-rate refinancings for the St. Lucie, Stanton and Stanton II projects, totaling approximately $265 million, and approved today a $185 million variable-rate refinancing for St. Lucie Project.
FMPA’s St. Lucie Project is an 8.8% ownership interest in St. Lucie Unit 2, an 838 megawatt nuclear power plant. FMPA has received approval to issue up to $300 million in bonds for this project. $185 million will be financed as variable-rate debt, and $115 million will be fixed-rate debt.
FMPA’s Stanton Project is a 14.8% ownership interest in Stanton Unit 1, a 425 megawatt coal-fired power plant. FMPA has received approval to issue up to $40 million in bonds for this project.
FMPA’s Stanton II Project is a 23.2% ownership interest in Stanton Unit 2, a 429 megawatt coal-fired power plant. FMPA has received approval to issue up to $110 million in bonds for this project.
FMPA’s ARP Executive Committee, which governs FMPA’s largest power supply project, All-Requirements, approved financings today for the project totaling $350 million. The financings will include $275 million in variable-rate debt and $75 million in fixed-rate debt. All the transactions are being issued to refinance the project’s auction rate securities. The Executive Committee previously approved $550 million of fixed-rate bonds in June 2008.
FMPA has now received all the Board and Executive Committee approvals necessary to complete its debt restructuring plan. The transactions may be completed as soon as September or October 2008.
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Florida Municipal Power Agency (FMPA) is a wholesale power company owned by 30 municipal electric utilities. FMPA provides economies of scale in power generation and related services to support community-owned electric utilities. The members of FMPA serve approximately 2 million Floridians. FMPA’s members are Alachua, Bartow, Blountstown, Bushnell, Chattahoochee, Clewiston, Fort Meade, Fort Pierce, Gainesville, Green Cove Springs, Havana, Homestead, Jacksonville Beach, Key West, Kissimmee, Lake Worth, Lakeland, Leesburg, Moore Haven, Mount Dora, New Smyrna Beach, Newberry, Ocala, Orlando, Quincy, St. Cloud, Starke, Vero Beach, Wauchula and Williston. Additional information is available on the Internet at www.fmpa.com.