The Paducah Power System board approved bond refundings Monday designed to maintain its debt service at the level of the last five years and stave off a potential rate increase.
The board approved refunding of 2009A bonds related to the utility's peaking plant and 2010A and B Kentucky Municipal Power Agency bonds related to the Prairie State Energy Campus.
According to Doug Handley, PPS director of finance, power supply and rates, the amount of PPS bonds being refunded is $26,505,000, and the amount of KMPA bonds being refunded totals $148,485,000.
"We're doing a straight refunding of the Paducah Power 2009A outstanding bonds for savings. It will lower the debt service for (about) five years," Handley said.
"It's just an ideal time to go to market for a refunding with the interest rates the way they are now," he said. "We're doing this as kind of a piggyback on the KMPA refinancing that's going on at the same time."
The bonds will be priced Aug. 22, with closing on the bonds anticipated to be Sept. 10 for PPS and Sept. 11 for KMPA.
"The initial (KMPA) refunding that we did five years ago (part of the utility's rate recovery plan) front-loaded the savings and lowered our debt for a five-year period," according to Dave Carroll, PPS general manager.
"We're getting ready to come out of that, so that debt would go up, which would mean a rate increase. What we're trying to do is avoid that by doing the refunding. There's two (KMPA) issues, one of them is a forward delivery because the bonds are not call-able and one is just a straight refunding for savings.
"The goal is to bring the debt service, moving forward, to the level we're at today or very close to it," Carroll said.
"We've hit the right time to go to market. We think we're going to be pretty successful in accomplishing that goal."