Consumers 2023 Securitization Funding is preparing to issue $646 million in asset-backed bonds, secured by a collateral pool of revenue from securitization charges based on its customers' electricity usage.
Consumers Energy, a fully regulated and vertically integrated electric utility subsidiary of CMS Energy Corporation, is sponsoring the deal, according to Moody's Investors Service. The division provides service to around 1.9 million customers in its service territory, and will be the deal's sponsor, seller and depositor. CMS Energy will also service the securitization property backing the bonds, Moody's said.
That securitization property confers the right to bill, collect and receive irrevocable and non-bypassable securitization charges based on customers' electricity usage. The Bank of New York Mellon is trustee on the deal, which will operate under a standalone issuer structure, according to the rating agency.
Michigan's financing order, which is similar to those of other states, allows deal sponsors to create the securitization property and issue the bonds to raise the funds, according to Moody's. That's just one of several credit positive aspects of the deal. Another is that the statute and financing order allows for a true-up adjustment mechanism. In this case the mechanism will adjust the charge securitization at least annually.
The securitization charge is starting from a low point, which represents about 1.9% of the total monthly electricity bill, while the ratepayer base is diverse and economically stable.
Consumers 2023 Securitization will issue two tranches of notes, a $250 million A1 class and a $396 million A2 class of notes. Moody's expects to assign ratings of 'Aaa' to both tranches, according to Moody's. The A1 and A2 notes have legal final maturity dates of March 1, 2028 and Sept. 1, 2031.
