Allegheny Energy Inc. is poised to become the third public utility to hit the market with a stranded cost securitization, following the earlier-than-expected approval of the plan by the Pennsylvania Public Utility Commission.
Already, Allegheny Energy, which has $670 million in recoverable stranded costs, has filed with the Securities and Exchange Commission to price a deal, most likely in the $500 million to $600 million range, a company official said. The offering could come as soon as the end of the month.
He said the utility's treasurer is presently in meetings with the underwriters to finalize the terms of the offering. The bonds will have a 10-year term and be repaid with proceeds from a per-kilowatt hour transition charge on customer bills.
Lead underwriters for the offering will be Morgan Stanley Dean Witter, with Goldman, Sachs & Co., Banc of America Securities, PNC Capital Markets and Pryor, McClendon Counts & Co., as syndicate members. Proceeds of the sale will be used to retire debt and to continue a common stock repurchase program that has already been initiated.
In March, PECO Energy became the first Pennsylvania utility to sell stranded cost bonds, with a $4 billion securitization, followed in late July by a $2.4 billion offering from PP&L Inc.
Through its four regulated electric utility subsidiaries, Allegheny serves more than 1.4 million customers in a 29,000 square mile area covering Pennsylvania, Maryland, Ohio, Virginia and West Virginia.