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News
Releases
FMPA Announces Debt Restructuring Plan
Agency restructures debt portfolio to liquidate auction-rate
securities, increase fixed-rate debt
ORLANDO,
Fla., June 17, 2008 – FMPA issued a statement to investors
today announcing the Agency’s plan to restructure its
debt portfolio to eliminate the use of auction-rate securities
and increase the percentage of its debt in fixed-rate securities.
The
proposed debt restructuring is expected to be accomplished
through seven transactions, including four fixed-rate transactions
and three variable-rate transactions. Together the transactions
would allow FMPA to refinance more than $871 million of the
Agency’s existing $1.3 billion debt portfolio and to
issue nearly $305 million in new debt, primarily to fund new
power supply facilities.
“We
understand that the instability of the auction-rate securities
market has become undesirable to many of our investors, so
we are taking decisive action to completely exit the auction-rate
securities market,” said FMPA General Manager and CEO
Roger Fontes. “We believe that the proposed debt restructuring
will serve the best interests of both our investors and our
ratepayers.”
Background
FMPA has historically included alternative debt structures
in its portfolio to reduce debt service costs and increase
financing flexibility, with the ultimate goal of reducing
costs for its ratepayers. One type of variable-rate debt instrument,
known as auction-rate securities, comprises a large portion
of the Agency’s current debt portfolio. Auction-rate
bonds are those with interest rates that are determined by
open-market competitive bidding, which typically occurs every
seven, 28 or 35 days. When there are not enough new investors,
the auction does not clear and existing bondholders who wanted
to sell must hold the securities. Interest rates after non-clearing
auctions are set at a level described in Official Statements
issued at the initial bond sale. (Detailed information about
these securities and their terms and conditions can be found
in the Official Statements for each bond issue. Bondholders
who wish to obtain a copy of the Official Statements can contact
Janet Davis or Edwin Nunez at FMPA.)
In
recent months, U.S. financial markets have had a crisis of
liquidity and credit, and the market for these auction-rate
securities has become increasingly unstable. Auction failures
are commonplace throughout the market and have increased interest
costs on all of FMPA’s auction-rate securities, prompting
the Agency and its Board of Directors to take action.
Debt
Restructuring Plan
FMPA’s Board of Directors and Executive Committee voted
on March 27, 2008, to authorize the elimination of auction-rate
securities from the Agency’s debt portfolio and to achieve
a goal of having between 50% and 60% of FMPA’s total
debt in fixed-rate obligations.
The
Agency’s staff and financial advisor are moving rapidly
to implement the Board’s direction. FMPA’s $1.3
billion debt portfolio has many series of auction-rate securities,
so the process of exiting the auction-rate market is anticipated
to take several months.
“We
appreciate the patience and support of bondholders during
this transition in the financial markets. We believe our upcoming
transactions will be attractive to investors,” said
Fontes.
Transaction
Details
The debt restructuring is expected to be accomplished through
seven separate transactions and is expected to impact four
of FMPA’s five power supply projects.
Due
to the diverse needs of municipal electric systems, FMPA was
established as a project-oriented agency. Each power supply
project is independent from the others, so no revenues or
funds available from one project can be used to pay the costs
of another project. Thus, debt must be issued separately for
each project.
FMPA’s
All-Requirements Project, the largest of the Agency’s
projects, provides all the wholesale power needs for 15 members.
The All-Requirements Project expects to issue approximately
$305 million in new debt, primarily to fund the development
of a new natural gas-fired combined cycle power plant. The
project plans to refinance approximately $451 million in outstanding
debt.
FMPA’s
St. Lucie Project is an 8.8% ownership interest in St. Lucie
Unit 2, an 838 megawatt nuclear power plant. The St. Lucie
Project expects to refinance approximately $286 million in
outstanding debt.
FMPA’s
Stanton Project is a 14.8% ownership interest in Stanton Unit
1, a 425 megawatt coal-fired power plant. The Stanton Project
plans to refinance approximately $35 million in outstanding
debt.
FMPA’s
Stanton II Project is a 23.2% ownership interest in Stanton
Unit 2, a 429 megawatt coal-fired power plant. The Stanton
II Project expects to refinance approximately $99 million
in outstanding debt.
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Florida
Municipal Power Agency (FMPA) is a wholesale power company
owned by 30 municipal electric utilities. FMPA provides economies
of scale in power generation and related services to support
community-owned electric utilities. The members of FMPA serve
approximately 2 million Floridians. FMPA’s members include
Alachua, Bartow, Bushnell, Chattahoochee, Clewiston, Fort
Meade, Fort Pierce, Gainesville, Green Cove Springs, Havana,
Homestead, Jacksonville Beach, Key West, Kissimmee, Lake Worth,
Lakeland, Leesburg, Moore Haven, Mount Dora, New Smyrna Beach,
Newberry, Ocala, Orlando, Quincy, St. Cloud, Starke, Vero
Beach, Wauchula and Williston.
Media
Contact:
Mark McCain
Assistant General Manager,
Public Relations and Human Resources
mark.mccain@fmpa.com
(407) 355-7767
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