Duke Energy Plans Securitization to Finance Retirement of Florida Nuclear Power Plant

Duke Energy Florida is seeking approval from its regulator to issue $1.3 billion of bonds backed by fees it will assess customers to cover the costs of retiring a nuclear power plant.

A state law was passed this year allowing the utility to securitize so-called asset recovery fees and the Florida Public Service Commission has already selected Saber Partners to advice on any such transactions.

On Monday, Duke filed a petition with the Commission detailing its plans to assess fees from its customers for up to 20 years and to sell this stream of income to a special purpose vehicle that will use the fees as collateral for bonds. The funds that Duke receives from the securitization trust will be used to close the Crystal River Unit 3 power plant.

Duke anticipates that the bonds issued by the securitization trust will have triple-A ratings from at least two nationally recognized rating agencies. It expects to offer them to investors via a public offering registered with the Securities and Exchange Commission, which is typical of utility securitizations.

Duke will be the initial servicer of the bonds.

This is the second time the Florida Commission has chosen Saber Partners as its financial advisor on a new type of corporate utility security offering. The firm assisted the Commission on the nation’s first “hurricane-recovery securitization” for Florida Power & Light.

"This special type of bond offers investors the safest form of investment possible in the capital markets,” Joseph S. Fichera, Saber’s CEO, said in a press release. “They should have yields only slightly higher than U.S. Treasuries and U.S. Agency bonds,” he added.

DEF serves approximately 1.7 million retail customers in Florida. Its service area comprises approximately 20,000 square miles in 35 of the state’s 67 counties. It supplies electricity at retail to approximately 350 communities and at wholesale to Florida municipalities, utilities, and power agencies in the State of Florida

The nuclear asset-recovery charge will be nonbypassable, and must be paid by all existing and future customers receiving transmission or distribution services from DEF or its successors or assigns under Commission-approved rate schedules or under special contracts, even if the customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in this state.