Chugach completes successful refinancing
Chugach Electric Association has completed a $275 million refinancing at historically low interest rates. The transaction closed on Jan. 21, following months of effort. The bonds carry a weighted average interest rate of 4.57 percent. Chugach will use the proceeds to pay off existing higher-interest debt as it comes due in 2011 and 2012, thereby lowering borrowing costs.
The refinancing comes at an opportune time when interest rates are lower than they have been in years. Working with its financial advisor, Chugach put together a presentation which its CEO and CFO presented to institutional investors at several locations in the Lower 48. The response was very positive, with 20 different investors subscribing to the offering.
Unlike those they are retiring, the new amortizing bonds will be secured by a first lien on substantially all of Chugach assets. Maturities vary from 20 to 30 years. The bullet debt which will be replaced pays interest rates ranging from 6.20-6.55 percent.
In advance of the refinancing, Chugach sought and received assurance from the Regulatory Commission of Alaska that its significant expenditures associated with the construction of the new Southcentral Power Project would be recoverable in future rates. That action was noted by national ratings agencies, and subsequently Standard & Poor's Ratings Services and Moody's Investors Service reaffirmed Chugach's credit ratings of "A-" and "A3," respectively.
Chugach is the largest electric utility in Alaska, providing power for Alaskans throughout the Railbelt through retail, wholesale and economy energy sales.