Southern Indiana Gas & Electric is sponsoring a securitization of charges from retail electric customers, raising $341.4 million in the process.
SIGECO Securitization I, as the deal is called, works like the typical securitization of utility charges. It will be collateralized by securitization property that includes the rights to a special, irrevocable and mandatory charge on electric retail customers' bills. The charge appears on the electricity bills of 151,651 customers and the natural gas bills of 115,145 customers, according to a pre-sale report from Moody's Investors Service.
Like other asset-backed securities (ABS) deals, the SIDECO securitizations are powered by a financing order that creates an irrevocable right to impose the charges on customers' electricity bills. Among the deal's credit strengths, the deal has a statutory true-up adjustment mechanism, which is the key form of credit enhancement supporting the bonds, according to Moody's.
The true-up adjustment mechanism adjusts the securitization charge at least annually to ensure that enough collections are taken to keep up with timely payments of interest and scheduled principal on the bonds. The amounts will also be used to pay for associated ongoing financing costs, and replenish the capital subaccount until the bonds are paid in full, Moody's said.
SIGECO, a wholly owned subsidiary of CenterPoint, will act as the servicer on the bonds, something that Moody's counts as a credit positive. The sponsor is a direct subsidiary of Vectren Utility Holdings, which itself is a subsidiary of CenterPoint Energy, Moody's said.
"The likelihood of a disruption in servicing of the securitization property backing the bonds is remote," the rating agency said.
The deal has a few credit challenges, however, including a high exposure to commercial and industrial customers. In 2022, these types of customers comprised about 60% of SIGECO's electric sales. Ultimately it exposes the pool to more volatility, because industrial operations are more closely tied to the business cycle.
