The South Carolina Public Service Authority, also known as Santee Cooper, sold $1.31 billion in bonds to finance a capital improvement program that will make the state’s power supply more renewable.
The authority issued $1.24 billion in tax-exempt bonds and $73 million in taxable bonds. The tax-exempt bonds, which the authority sold in two series, mature between 2026 and 2054, yielding between 3.14% and 4.34%. The taxable bonds also mature between 2026 and 2054, paying interest at rates between 4.983% and 5.583%.
The securities received an underlying rating of A- from Fitch Ratings, A3 from Moody’s Investors Service, and A- from S&P Global Ratings. They received an insured rating of A1 from Moody’s and AA from S&P. Fitch upgraded the authority’s outlook to stable from negative.
The outlook revision reflects the expectation that Santee Cooper’s ”financial flexibility and revenue defensibility will improve following the expiration of its agreement to lock rates through January 2025,” Fitch analysts wrote.
The expiration of that agreement will mark a major milestone in the saga that began when Santee Cooper suspended construction of a nuclear power plant in 2017. At the time, Santee Cooper had already invested $4.3 billion in the plant, which was 36% complete, according to Fitch.
The suspension sparked a maelstrom of costly legal and political woes for Santee Cooper, the largest power and water utility in South Carolina. As part of the agreement that mostly put those concerns to rest, the authority agreed in 2020 to pay $200 million back to its customers and freeze rates for five years.
Santee Cooper will use the proceeds from the bond sale to fund its capital improvement program, which calls for retiring coal-fired power plants and increasing solar-powered generation. It also adds natural gas resources and battery storage to the utility’s energy portfolio.
Santee Cooper will use additional issuance proceeds to refund bonds that it sold in 2013 and 2014.
The bonds are limited obligations of the authority, payable by its revenue.
J.P. Morgan Securities LLC served as lead underwriter on the issuance, purchasing the bonds for $1.41 billion. The price reflected a premium of $108.3 million. PFM Financial Advisors LLC acted as municipal advisor.