Ohio Power Company plans to issue a $267.4 million utility receivables securitization deal called Ohio Phase-In-Recovery Funding LLC.
The rate-reduction bonds, as they are sometimes called, are backed by the future collections of special charges applied to electric utility bills, which is based on power usage and can vary from year to year based on weather or economic conditions.
To protect bondholders from fluctuations in collection, the deal was structured with a “true-up” mechanism. The true-up adjusts tariff charges to existing and future retail electric customers to ensure timely payment of the bonds .
Utility receivables are also known as stranded-asset securitizations or storm-recovery bonds.
The deal comes just weeks after First Energy priced a trio of deals issued by its subsidiaries -- the Cleveland Electric Illuminating Company, Ohio Edison Company and the Toledo Edison Company. These transactions were the first to be issued under Ohio’s utility securitization law.
Citigroup and RBC Capital Markets will manage the latest deal which is structured with triple-A notes offered over two class A tranches. Moody’s Investors Service assigned preliminary rating to the deal.
OPCo is a wholly-owned subsidiary of American Electric Power Company (AEP), a public utility holding company based in Columbus, Ohio. OPCo is the largest of AEP’s 10 electric utility subsidiaries.