Basin Electric closes debt issue
The Financial Services staff recently completed a successful debt issue to fund ongoing construction projects.
Dakota Gasification Company - October 22, 2009
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Buzz Hudgins, Basin Electric’s chief financial officer and senior vice president of Financial Services, and his staff recently completed a successful debt issue to fund ongoing construction projects.
In late September, Hudgins, Ron Harper, Basin Electric CEO and general manager, Steve Johnson, manager of treasury services, and board Directors Don Applegate and Roy Ireland traveled to New York City to deliver presentations to the financial community. The group met with Moody’s Investor Services, Standard & Poor’s, JPMorgan, Goldman Sachs, US Bank, and Fitch Ratings Service. Nine different insurance company representatives also attended the group’s meeting with US Bank to discuss a private placement debt issuance. Hudgins and Johnson followed up with an investor conference call, which garnered 27 participants.
“These meetings with the financial community went extremely well,” Hudgins said. “We have found that frequent communication with this group is appreciated, and assists us in raising the necessary capital to fund our construction program.”
Several potential investors were in Bismarck, ND, Oct. 7-8 to conduct due diligence, which included presentations by Basin Electric management and staff. The investors also toured Basin Electric facilities, including Dakota Gasification Company’s Great Plains Synfuels Plant (photo at left).
Twenty-four investors participated in this financing,15 of which were new lenders to Basin Electric. “This is also good news for Basin,” Hudgins noted. “We like increasing our investor base.”
While the bids totaled $668.5 million, Basin Electric chose to issue debt in the amount of only $535 million. That amount is divided among three issues: the first was $325 million at an interest rate of 4.0 percent, six-year average life, seven-year final; the second was $100 million at an interest rate of 4.89 percent, 14-year average life, 18-year final; and the last was $110 million at a interest rate of 5.59 percent, 29 five-year average life, 30 five-year final.
Johnson said U.S. Treasury rates remain at historic low levels. “Credit spreads have contracted by approximately 330 basis points for A- rated utilities since the Lehman (Bros.) filing in 2008, and are only 30-40 basis points above the historic lows,” he said. “This results in the lowest coupons in the last four years and among the bottom quartile over the past 20 years.” The coupon (interest rate) for the bond issue was set on Oct. 1 and closing is scheduled to occur on Oct. 21.
Headquarters
1600 E. Interstate Ave.
PO Box 5540
Bismarck, ND 58506-5540 USA
701.221.4400
Great Plains Synfuels Plant
420 County Road 26
Beulah, ND 58523-9400 USA
701.873.2100
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