NEWS
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N.Y. Power Authority: To Refund $72.1 Million in Auction Rate Securities Contact: June 24, 2008 FOR IMMEDIATE RELEASE MASSENA—The Trustees of the New York Power Authority (NYPA) authorized Tuesday the issuance of tax-exempt commercial paper notes to refund $72.1 million of its debt previously issued as Auction Rate Securities (ARS). “The Power Authority carefully manages its debt for the benefit of our customers and for the protection of our bondholders,” said Roger B. Kelley, NYPA president and chief executive officer. “Today’s action will allow us to continue to achieve our core mission of creating and transmitting low-cost power that serves governmental agencies, businesses, non-profits and communities across New York State.” In August 2000, NYPA issued Subordinate Revenue Bonds in four separate series. Series 1 and Series 2 have been retired. Series 3 and Series 4 were issued as ARS in a total principal amount of $80 million, of which $72.1 million is outstanding. The proceeds of Series 3 and 4 were used for construction of NYPA’s 500-mw Combined-Cycle Power Plant, in Astoria, which began operations at the end of 2005 for the benefit of NYPA’s New York City Governmental Customers. Beginning this past February, demand in the ARS market began to wane. On Feb. 13, NYPA’s Series 4 ARS experienced a failed auction, which was the first-ever ARS failure for the Power Authority. Since then, both the Series 3 and 4 ARS have continued to experience failed auctions. The failed auction rate is higher than the equivalent tax-exempt commercial paper rate. By refunding the ARS with tax-exempt commercial paper, NYPA expects to reduce its interest expense while also exiting the deteriorating ARS market. To refund the Series 3 and 4 ARS, the Power Authority will use Series 2 of its Tax-Exempt Commercial Paper which was authorized by the NYPA trustees in 1997 for up to the maximum amount of $300 million and subsequently increased to a maximum amount of $450 million. Currently, just under $250 million of Series 2 Notes are outstanding. In another action related to NYPA’s debt, the Power Authority Trustees today approved expanded authorization limits for two of the Authority’s commercial paper marketing agents. In early May 2008, UBS, one of NYPA’s marketing agents for tax-exempt commercial paper notes, announced it will be exiting the institutional municipal securities business. UBS was authorized for up to $175 million and was currently marketing $105.3 million in Series 2 Tax-Exempt Commercial Paper that is scheduled to be remarketed beginning July 1. As a result the Series 2 Tax-Exempt Notes assigned to UBS, are being redistributed to two other authorized dealers, Citigroup and JPMorgan Securities Inc. Citigroup is now authorized to market up to $100 million in Tax-Exempt Notes for an increase from $50 million and it currently has about $40 million outstanding. JPMorgan Securities Inc. is also now authorized to market up to $100 million, increased from $50 million with no outstanding issues. The third authorized dealer for NYPA’s Series 2 Tax-Exempt Commercial Paper program is Goldman Sachs & Co., which is authorized for up to $175 million and has issued $100.5 million to date. The increase in the amounts of Series 2 Tax-Exempt Notes that Citigroup and JPMorgan Securities Inc. may market, along with the Series 2 Notes Goldman Sachs may market, will enable the Authority to redistribute the Series 2 Notes currently marketed by UBS and refund the outstanding Series 3 and 4 ARS. The effect of refunding the ARS with Series 2 Tax-Exempt Commercial Notes is expected to reduce NYPA’s monthly expenses by about $73,000. Financial data and information are provided for general informational purposes only, and are not intended for making any investment or financial decisions. NYPA shall not be liable for any errors or delays in the data or information. About NYPA: ■ NYPA uses no tax money or state credit. It finances its operations through the sale of bonds and revenues earned in large part through sales of electricity. ■ NYPA is a leader in promoting energy efficiency, new energy technologies and electric transportation initiatives. ■ It is the nation’s largest state-owned electric utility, with 18 generating facilities in various parts of the state and more than 1,400 circuit-miles of transmission lines. ■ For more information, please go to www.nypa.gov. |
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