Financial Services meets with NYC bankers

Basin Electric staff discussed renewal of a credit facility and held a “net road show” for a private placement offering.

Basin Electric Power Cooperative - October 14, 2011

Paul Sukut, Basin Electric chief financial officer and senior vice president of Financial Services, and Steve Johnson, Basin Electric manager of treasury services, met in early October with representatives from ten banking firms (JPMorgan Chase, The Bank of Tokyo—Mitsubishi, Bank of Montreal, CIBC, CoBank, Wells Fargo, U.S. Bank, PNC Bank, CFC, and Goldman Sachs) in New York City to discuss the renewal of one of the cooperative’s credit facilities. In addition, they held a “net road show” to present the Basin Electric credit and discuss a private placement offering.

“We came for two specific purposes,” Johnson said. “The first was to discuss a credit facility which expires in December 2012, that we use to backstop our commercial paper program.” He said Basin Electric returned to the commercial paper market four years ago knowing that it would be a long-term endeavor. “It’s always been our intent to renew this facility at least one year from maturity,” Johnson said. Basin Electric is in the midst of putting into place a $500-million revolving credit facility with a five-year term that is scheduled to close on Oct. 27. JPMorgan and The Bank of Tokyo—Mitsubishi are serving as joint placement agents on the transaction.

On Oct. 5, Sukut and Johnson gave an overview of a $300-million private placement during a net road show with 42 representatives from financial institutions and numerous insurance companies. Johnson said Basin Electric completed a $325-million private placement back in 2009 with bullet payments in 2014, 2015 and 2016.

“At that time we thought we were coming out of a construction cycle; we didn’t foresee what could conceivably be up to $350 million of CAPEX (capital expenditures) for transmission build out in the Bakken,” Johnson said. Basin Electric’s transmission capital expenditures will occur about the same time as the bullet payments are due. “So, rather than being concerned about liquidity pressures, we did some preplanning. We’re going to use the current private placement to prepay the bulk of the bullet principal payments that would have occurred while building transmission during those years.” Johnson said that given current low interest rates, “we thought it was a prudent time to go back into the market.”

After the presentation, participants were invited to participate in a question/answer forum. Since launching the transaction on Oct. 3, Johnson said that he and Sukut have participated in regular market update calls while investors “are doing their homework.” Goldman Sachs and U.S. Bank are leading the transaction as joint placement agents.

Sukut said the net road show was a good update for the bankers and insurance company representatives. “We wanted to be able to speak not just to the strength of the cooperative, but also to the strength of the entities standing behind us.”

The investment community as a whole may be cautious right now, Johnson said, but he sees investors remaining supportive of companies that provide a necessary staple like electricity. “Also, they look at several other factors, such as liquidity, our board setting the Class A member rate as well as Basin Electric’s long-term power contracts. The strength of our members and the long-term wholesale power contracts are the lynch pins of the Basin Electric credit and are very important to potential investors and the banking community.”