Fees charged to utility customers to finance storm damage repairs will secure $561.3 million in asset-backed securities (ABS) coming to market from issuer Duke Energy Carolinas SC Storm Funding, a subsidiary of Duke Energy Carolinas.
The issuer will sell notes through just one tranche, a class A1 portion with a AAA rating from Moody's Ratings. The deal is expected to close on November 25, and the notes have a legal final maturity date of March 2046, Moody's said.
An irrevocable financing order that the Public Service Commission of South Carolina issued last August. Storm recovery property authorizes Duke Energy Carolinas SC Storm Funding to impose, collect and receive storm recovery charges on Duke Energy Carolinas 760,000 metered retail electric customers in South Carolina, Moody's said.
Barclays and RBC Capital Markets are managing the deal, according to Asset Securitization Report's deal database.
In this case, the proceeds from the deal will recoup costs for repairs on energy infrastructure damaged after Hurricane Helene in 2024.
Among the deal's credit strengths is a true-up adjustment mechanism, common among storm recovery securitizations, which adjusts the storm recovery costs at least semi-annually. Quarterly true ups will occur for the last 12 months before the final scheduled payment, Moody's said. This will support cash flows and make sure bond payments remain timely.
Duke Energy Carolinas is the servicer, which also serves the deal well from a credit standpoint. DEC, which has an A2 rating with a stable outlook, is the largest subsidiary of Duke Energy Corporation, which has a Baa2 rating and whose outlook is also stable. The latter has been in operation since 1904, so combined with its credit strength, the experience makes Duke Energy Carolinas a strong servicer for the deal, Moody's said.
Only two potential credit challenges are attached to the deal, according to Moody's, including a challenge to the South Carolina securitization law and the financing order, the two mechanisms that provide the underlying revenue to the notes.
