Louisiana Utilities Restoration Corp., Series 2022A is preparing to issue $3.1 billion in system restoration bonds secured by charges to ratepayers in the Louisiana Public Service Commission’s jurisdiction.
Proceeds from the issuance, which is slated to close on May 17, will support certain system restoration costs related to damages sustained from hurricanes Laura, Delta and Zeta in 2020, and Winter Storm Uri in 2021, according to Moody’s Investors Service. Funds will also be used to establish a special Hurricane Ida escrow storm damage, and reestablish a regular storm damage reserve escrow for Entergy Louisiana’s operations.
U.S. Bank Trust Co. and National Association are trustees on the deal, the rating agency said.
Like similar deals, Louisiana Utilities Restoration Corp. is powered by a financing order and a securitization law. The financing order that establishes the system restoration property, which in turn empowers the utility to charge customers in its jurisdiction for costs related to getting operations back online after severe storms. Moody’s regards these as credit strengths.
Also, the transaction benefits from the inclusion of a state non-impairment pledge in the securitization provisions of the restoration law. This will allow the state of Louisiana to promise bondholders that it will not take any action to impair the value of the system restoration property, Moody’s said.
Another credit strength noted that the system restoration property encompasses a large territory that Entergy Louisiana serves. Entergy Louisiana’s service territory spans 58 parishes, serving about 1,119,869 retail electric customers.
The rating agency noted certain potential credit challenges, including the pool’s high exposure to industrial and commercial customers. In 2021, industrial and commercial customers made up about 64% Entergy Louisiana’s electric segment revenue. Moody’s says the concentration is a relatively high concentration compared with other UCRC securitizations. Consumption by industrial and commercial customers is more volatile compared with residential customers, because that energy consumption is more closely tied to business cycles.
Moody’s said that it expects to assign ‘Aaa’ ratings throughout all of the classes of notes, from the $750 million, A-1 notes to the $1 billion, A-4 notes.
