Michigan utility provider Consumers Energy Company is planning to issue a $385 million utility cost recovery bond.
Moody's Investors Service has assigned provisional ratings of Aaa’ to the series 2014-A senior secured securitization bonds. Citigroup and Goldman Sachs are the lead managers on the deal.
The bond is structured under State of Michigan legislation that authorizes the issuer to recover certain qualified costs via securitization. They are backed by the future collections of special charges applied to electric utility bills; these charges are based on power usage and can vary from year to year, based on the weather or economic conditions.
To protect bondholders from fluctuations in collection, the deals are structured with a “true-up” mechanism that adjusts tariff charges to existing and future retail electric customers to ensure timely payment of the bonds.
As of December 31, 2013, Consumers Energy provided electric service to approximately 1,790,859 metered Michigan retail electric customers, according to the Moody's presale report. During the twelve months ended December 31, 2013, Consumers Energy billed approximately 2,535 million kilowatt hours of electricity to its retail electric customers in Michigan resulting in revenues of approximately $3,957 million.
