BRADENTON, Fla. — After years of planning, a major North Carolina municipal electric agency sold most of its assets to Duke Energy Progress for $1.25 billion and defeased $1.72 billion of bonds.
The North Carolina Eastern Municipal Power Agency and Duke completed the deal Friday, lowering NCEMPA's outstanding debt as well as future energy costs for the agency's 32 member cities and towns and their 271,000 customers.
The NCEMP's asset sale closed simultaneously with the bond defeasance.
The Power Agency also entered into a 30-year wholesale power agreement with Duke.
"This purchase will provide long-term fuel savings," said Paul Newton, Duke Energy's North Carolina president. "The agreement represents the best spirit of private and public sectors working together toward a common goal."
The complex transaction closed months ahead of schedule, according to Graham Edwards, chief executive officer of ElectriCities, manager of North Carolina's state-owned public power agencies.
Numerous regulatory, state, and local approvals were necessary to accomplish the asset sale, including the concurrence of the state Legislature, federal agencies, and all 32 members of the joint power agency.
The deal also required the NCEMPA to issue $421 million of 10-year taxable bonds on June 16. The bonds were taxable because the defeased debt had been advance refunded once already, according to state officials.
Bond proceeds along with the $1.25 billion from Duke enabled NCEMPA to take out $1.72 billion of debt, cutting the amount of outstanding bonds to $421 million, agency spokeswoman Rebecca Agner said Friday.
The uncallable taxable bonds are rated A by Fitch Ratings and A-minus by Standard & Poor's.
Fitch said its A rating reflected the agency's significant reduction in debt as well as anticipated reduction in operating and financial risk.
Duke's $1.25 billion payment covered the Power Agency's ownership stake in three nuclear power units and two coal-fired units, including fuel inventories, and spare parts.
NCEMPA's interest in the Duke-owned generating facilities contributed to members' high wholesale power rates largely attributable to the high fixed costs of the power system and related debt service costs.
Cities and towns were expected to see power costs reduced by 15% to 19% as a result of the asset sale and debt reduction.
Public Financial Management Inc. was financial advisor for the June 16 bond deal.
Bank of America Merrill Lynch was the book-runner. The syndicate included Barclays Capital, First Southwest Co., Morgan Stanley, Raymond James & Associates, U.S. Bancorp., and Wells Fargo Securities.
Hawkins Delafield & Wood LLP was bond counsel. Womble Carlyle Sandridge & Rice LLP was underwriters' counsel.
