Allegheny Energy, which is preparing a $466 million transaction to finance the costs of construction on an emissions control facility at a West Virginia plant, recently specified the amount of registered bonds to be issued under one portion of its planned transaction.
In an amendment filed with the Securities and Exchange Commission (SEC) about two weeks ago, Allegheny Power, based in Greenburg, Pa., specifies that the special-purpose subsidiary called MP Environmental Funding will be registered to issue about $350 million in senior secured debt. The proceeds from the issuance will finance construction of equipment to remove sulfur dioxide from coal burning emissions at the Fort Martin Power Station near Maidsville, West Virginia. Not only will the deal allow Allegheny to recoup actual construction costs through the bond financing, but it can also recoup actual construction costs that exceed $450 million during the period prior to construction.
The so-called scrubber technology will bring the plant into compliance with the latest emissions control rule from the Environmental Protection Agency. The EPA's Clean Air Interstate Rule calls for 28 states and the District of Columbia to reduce nitrogen oxide and sulfur dioxide emissions from power plants by 2015. The changes at the Fort Martin plant will allow Allegheny Power to burn more high-sulfur coal mined from West Virginia, according to SEC filings.
The debt, also called environmental control bonds, will be issued using securitization techniques. Part of the bond issuance will be secured by an environmental control charge that will appear on consumers' utility bills. Although the amount of that environmental control charge has changed several times since the deal was proposed, the financing order says the average residential customer might pay about $3.79 over the life of the bonds.
Allegheny Power set up two bankruptcy-remote special-purpose entities, MP Environmental Funding and PE Environmental Funding, named after two of its corporate subsidiaries Monongahela Power and Potomac Edison, respectively. The latter two companies serve customers in jurisdictions covered by the West Virginia Public Service Commission's financing order, and Monongahela Power owns the Fort Martin plant. When PE Environmental Funding issues debt, it will use the net proceeds to prepay MP Environmental Funding for purchase power. Allegheny also plans to update the filing for PE Environmental Funding at a later date, company officials said.
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