First securitized utility debt in Oklahoma validated by a court


Oklahoma’s first of four securitization deals tied to 2021’s Winter Storm Uri could hit the market as soon as this summer after winning approval from the state’s Supreme Court.

The High Court on Tuesday validated approximately $800 million in taxpayer-backed bonds to fund the recovery of fuel costs incurred by Oklahoma Gas and Electric Company (OG&E) during the February 2021 storm.

Michael Davis, president and chief executive of the Oklahoma Development Finance Authority, the intermediary issuer of the bonds, said Thursday that there were more steps left before the deal could be priced, including the possibility “very unlikely” that a request for a rehearing will be filed within 20 days. of the court’s decision and a review of legal documents by the state attorney general.

“We may be able to run some processes concurrently,” he said. “I’ve seen estimates that we could be in the market as early as June, maybe July.”

The taxable bonds were made possible by legislation passed in Oklahoma last year that created a securitization framework to address billions of dollars in increased energy costs incurred by utilities during the storm and mitigate the impact on taxpayers by spreading payments over a longer period.

The 2021 Uri winter storm wreaked havoc across the Southwest, including Oklahoma, where a court upheld bonds for the first of four securitization deals to deal with billions of dollars in increase in energy costs incurred by utilities and to mitigate the impact on ratepayers by spreading payments over a longer period of time.

Bloomberg News

RBC Capital Markets is the lead manager of the operation, Wells Fargo is co-lead manager and the co-managers are BOK Financial Securities, Morgan Stanley and BofA Securities.

Three other deals are pending state Supreme Court approval — about $1.35 billion in bonds for Oklahoma Natural Gas, $688 million in bonds for Public Service Company of Oklahoma, and $75.7 million in bonds for Oklahoma Natural Gas. dollars worth of bonds for Summit Utilities Oklahoma, which took over CenterPoint Energy.

“The issues that were raised in (the OE&G case) were the same for the other three,” Davis said. “I hope the court will do without the other three in the same way. But it depends on them.”

The OE&G case had 15 individual opponents, including a former state legislator, questioning whether the bonds were properly authorized under state law and whether the bonds were constitutional.

“We answer both in the affirmative,” the high court said in its initial opinion. “The authorization of the taxpayer-backed bonds followed the law well, and the bonds are self-liquidating and therefore constitutional.”

Under state law, securitizations are limited to Uri-related fuel costs for utilities that fall under the oversight of the Oklahoma Corporation Commission.

Oklahoma isn’t the only state to turn to securitizations in the aftermath of the 2021 storm. The Texas Natural Gas Securitization Finance Corporation may choose underwriters for a $3.4 billion bond issue during its Friday meeting.


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