The Brazos Electric Power Cooperative is coming to market with a $713 million securitization deal. Securitized property based on electricity customers' usage will secure the repayment of the bonds.
Ten of the 16 electric distribution cooperative members, which provide electric service to about 208,000 customers in the area between Fort Worth and Austin, will participate in the transaction, according to Moody's Investors Service. Each of the participating co-op members will sell their portion of the securitization property to the trust, and service them, while Brazos will be the master servicer on the securitization.
The deal is the latest among electric power cooperatives, located in Texas, to recover costs incurred in the wake of Winter Storm Uri, including $3 billion from recent transactions ERCOT, CoServ and United Electric Cooperative just in H2 2022.
Earlier in the year the $2.1 billion ERCOT ratepayer-backed bond deal priced its fixed-rate notes at close to par, with spreads between 120 and 190 basis points, according to Finsight.
Indeed, an increase in power prices on the Electric Reliability Council of Texas (ERCOT) wholesale market, as well as natural gas. Some of the co-operatives declared bankruptcy as a result of the strain on their financial resources, including Brazos, which did so in March 2021, according to Moody's.
Each of the cooperative members adopted the irrevocable financing order, the contractual feature that shores up repayment to the bonds and credit enhancement to the bonds that the trust will issue, the rating agency said.
Moody's expects to assign ratings of 'Aaa' to tranches A-1, A-2 and A-3, which have legal maturity dates of March 2034, March 2043 and September 2052, according to Moody's.
Potentially adding strength to the notes, according to Moody's, residential customers make up the majority of the co-op members' customer base.
