East Kentucky Power Cooperative Seeks Approval for $450 Million Private Placement or Bank Debt

Strategic Insights -

East Kentucky Power Cooperative, Inc. (EKPC) has submitted an application to the Kentucky Public Service Commission for approval of the authority to issue up to $450 million of secured or unsecured private placement or bank/financial institution debt obligations. The cooperative received a deficiency letter from the Commission on February 28, 2025, citing a lack of information regarding the description of terms, interest rates, and security for the proposed bonds/notes/other indebtedness.

Key Takeaways:

  • EKPC is seeking approval to issue up to $450 million of secured or unsecured private placement or bank/financial institution debt obligations.
  • The cooperative received a deficiency letter from the Commission on February 28, 2025, citing a lack of information regarding the description of terms, interest rates, and security for the proposed bonds/notes/other indebtedness.
  • EKPC believes that it provided all the necessary information in its application, specifically in paragraphs 8, 11, 19, and 20 of the Application.
  • The cooperative is seeking to use the proceeds from this transaction to reduce some or all of the outstanding obligations under its Credit Facility, which was approved by the Commission in Case No. 2021-00473.
  • As of February 15, 2025, approximately $450 million of the $600 million facility is drawn and currently bears a variable interest rate of approximately 5.25-5.5%.
  • The current maturity date of the Credit Facility is July 26, 2029.
  • The interest rates on the Financing are expected to be reasonable compared to the Credit Facility rates when adjusted for tenor and consideration of fixed versus floating rate.
  • EKPC is providing additional detail regarding the expected interest rates for unsecured floating-rate bank debt and private placement debt.
  • The cooperative is seeking to obtain the flexibility to use either form of financing depending on which is most beneficial and available at the time of issuance.

Statistics:

  • $450 million: The maximum amount of secured or unsecured private placement or bank/financial institution debt obligations that EKPC is seeking to issue.
  • 2/28/2025: The date on which the Commission issued the deficiency letter to EKPC.
  • $450 million: The amount of the Credit Facility that is currently drawn.
  • 5.25-5.5%: The variable interest rate on the drawn Credit Facility.
  • 7/26/2029: The current maturity date of the Credit Facility.
  • 4.3%: The current rate of the Secured Overnight Financing Rate (SOFR), which is expected to be used for unsecured floating-rate bank debt.
  • 3%: The maximum spread that will be added to the SOFR for unsecured floating-rate bank debt.
  • 7.3%: The maximum interest rate that will be paid for unsecured floating-rate bank debt.
  • 7.5%: The maximum interest rate that will be paid for private placement debt.
  • 2021-00473: The case number in which the Commission approved the Credit Facility.

Sources:

  • 807 KAR 5:001, Section 18(1)(c)
  • 807 KAR 5:001, Section 18(1)(f)
  • 807 KAR 5:001, Section 12(1)(a)
  • Case No. 2020-00085
  • Case No. 2021-00473