Add RG&E Storm Funding to the crop of utility cost recovery charge securitizations coming to the capital markets this week, as the issuers tees up a $75.3 million securitization, through series 2025-A.
Just one tranche of notes will be sold to investors, the A1 tranche. The notes have an expected final maturity date of May 1, 2035 and a legal final maturity date exactly two years after that. Issuance proceeds will be used to repay short-term borrowings and for genera corporate purposes, according to Moody's Ratings.
Moody's and S&P Global Ratings assign Aaa and AAA to the A1 tranche, respectively.
J.P. Morgan Securities is the deal's manager, while Rochester Gas & Electric Corp. services the notes, Moody's said.
RG&E's bonds, like other stranded utility cost securitizations, are backed by the sponsor's right to impose, charge and collect funds from existing and future electric utility customers in its coverage area. That service area includes about 392,000 electricity customers in a nine-county region around Rochester, Moody's said.
The Financing Order, which supports the securitization law, is one of the deal's credit supports. The Financing Order also authorizes a mandatory uncapped true-up mechanism that authorizes RG&E to raise the recovery charge at least semi-annually, to ensure adequate cashflow to the notes, the rating agency said.
Yet there are challenges to the bonds' timely repayment, Moody's said. The Financing Order and securitization law could face regulatory actions—albeit remote—that weaken them. The deal also has relatively high exposure to non-residential customers, particularly commercial and industrial account holders. The latter accounts for about 59.6% of electric usage in the area, and 39.03% of the utility's revenue by customer class.
The deal is scheduled to close on February 14.
