Vermont Electric Power Company (VELCO) has completed a $120m bond sale, which the company said May 23 will refinance short-term indebtedness needed for construction of electric transmission grid reliability projects.
The First Mortgage Bonds were sold in two tranches – $55m in 30-year bond at a fixed coupon rate of 3.85% and $65m in 40-year bonds at a fixed coupon rate of 3.9%. Those results, VELCO added, represent the most attractive pricing on record for an issuer in the U.S. private placement market, citing John Daly of Manor Private Capital, who managed the sale, and featured more attractive pricing than that obtained by electric utilities of comparable and higher credit ratings in the U.S. public and private capital markets.
The sale of the second tranche with a 40-year maturity was the first such transaction in the private placement bond market with a duration as long as 40 years, VELCO said.
Kerrick Johnson, VELCO’s vice president for external affairs, told TransmissionHub May 29 that the money “isn’t used so much to finance a particular project as help serve as bridge funding for any number of projects,” including a 950-mile fiber optic project and various substation upgrades, including a substation in Jay, Vt.
VELCO said the estimated savings over the bond’s life are about $20m when compared to the average pricing obtained by electric utilities of comparable credit quality in the U.S. public market at the time of issue in the private placement market over the last year.
On how the bond sale saves customers money, Johnson said, “Because customers ultimately have to pay the borrowing costs of this money, they save because the interest rate that was secured through this bond was so much lower than anticipated.”
The company, which completed the sale acting as manager for VT Transco, said it increased the bond offering’s size from $110m to $120m in response to high investor interest, and that the bond sale results were realized at a time when U.S. Treasury bond yields are near historic lows. DBRS continues to rate the company “A with stable trend.”