Black Hills Funds Coal With Bond Issue

11-03-2009 | Source: Power Finance & Risk

Black Hills Corp. unit Black Hills Power has issued $180 million in 6.125%, 30-year notes to fund its greenfield development of the 110 MW coal-fired Wygen III plant near Gillette, Wyo. “The markets are very receptive to utility paper. You get very good pricing and execution,” says Glen Grabelsky, managing director at Fitch Ratings Service in New York, of the company’s decision to come to market. The company priced the bonds on Oct. 22 and closed the deal on Oct. 27.

The 30-year tenor is likely a reflection of the company’s efforts to balance its debt maturity schedule, Grabelsky says, adding it had no 30-year paper outstanding prior to the issue.

Black Hills Power has been using an intercompany money pool shared by its sister companies Black Hills Utility Holdings and Cheyenne Light, Fuel & Power Co. to fund expenditures on the $247 million plant and proceeds from the issue will take down the $103 million the company has outstanding on the pool. The remaining proceeds will pay down first mortgage bonds coming to maturity next year. The size of the money pool and details on how the company plans to pay for the remaining plant costs could not be immediately learned. The plant is slated for operation early next year.

RBC Capital Markets, Royal Bank of Scotland and Scotia Capital are joint bookrunning managers. BMO Capital Markets and Mitsubishi-UFJ Securities are senior managers and the Williams Capital Group and U.S. Bancorp Investments are co-managers. A spokesman for the Rapid City, S.D.-based company declined to comment on its choice in underwriters for the issue. Tony Cleberg, cfo, was not available to comment by press time.