GEUS to issue $58 million in bonds

By BRAD KELLAR

GREENVILLE — The recent settlement agreement between the Texas Municipal Power Agency (TMPA) and its member cities, including Greenville, means GEUS, the local electric utility system, will have to refinance a significant amount of debt.

During Thursday’s regular session, the GEUS board of trustees intends to approve a bond underwriter syndicate to accomplish the task of selling approximately $58 million in debt.

The three-member syndicate would also be utilized for refunding a short-term loan to the utility from the Bank of America and to issue debt to pay for renovations to the future GEUS Consumer Service Center.

The GEUS board is scheduled to approve the syndicate during Thursday’s regular session, starting at 6 p.m. in the GEUS Service Center, 6000 Joe Ramsey Boulevard.

Last month, both the GEUS board of trustees and the Greenville City Council approved a “global compromise settlement agreement” of a pending lawsuit filed against the TMPA concerning the financing of debt for the Gibbons Creek Steam Electric Station, a coal fired steam electric plant. Since then, the TMPA board and the agency’s other member cities of Bryan, Denton and Garland (each of whom have two representatives on the TMPA board) also signed off on the measure, which came after district courts in Travis and Grimes counties ordered mediation to settle the long running dispute.

Under the six-page agreement, the cities are to agree to retire existing generation-related debt as scheduled by Sept. 1, 2018, unless an extension is approved by all of the governing bodies in the member cities.

By May 1, 2010, each city shall provide to TMPA the funds necessary to pay for its proportionate share of a $98.5 million “scrubber project”, which is described in the agreement as a project designed to control emissions of sulphur dioxide and mercury at the Gibbons Creek plant.

Also by May 1, each city shall individually provide to the TMPA the funds necessary to pay each city’s proportionate share of the agency’s “refundable generation related debt”, which under the agreement means the following amounts of TMPA’s subordinate lien bond series: Series 2003 ($56.93 million), Series 2004 ($77.33 million) and Series 2004A ($61.38 million).

In a memo to GEUS General Manager David McCalla, Steven Adams with Specialized Public Finance Incorporated, said the settlement agreement made fundamental changes to the relationship between the TMPA and its member cities and moves a great deal of the TMPA debt onto the member cities.

“Consequently, GEUS will now have to sell approximately $58 million in debt in a very complex financial structure,” Stevens said. “Such as a change will make the marketing of GEUS debt more complex and time consuming. Enlisting the services of underwriting firms prior to the sale will give them greater opportunity to pre-market the debt and create more demand for the bonds.”

The syndicate up for consideration by the GEUS board Thursday includes Barclays Capital as the lead underwriter, along with First Southwest and Edward Jones. The underwriter fee will be paid out of the bond proceeds.

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