After a financial advisor for EPB announced to the board on Wednesday that the organization had received an upgrade to a AA+ bond rating from Fitch Ratings, the members approved the issuance of new bonds that will reduce interest costs by approximately $19.8 million in net present value.
These new bonds will “refund” existing infrastructure bonds and they come after the city went to sell $260.1 million in par value new bonds— $234.2 million will be used by EPB for the “refunding” at a lower rate.
The new bonds are priced 1.2 percent lower than their existing price of 4.4 percent.
The upgraded rating makes EPB one of the highest-rated municipal electrical utilities in the nation, better than its counterparts in Nashville, Knoxville and Memphis, officials said.
EPB had previously been rated AA+ before by Fitch ratings, but was downgraded several years ago when its fiber optic network was put in place. Since that infrastructure development was yet unproven, the rating dropped.
Since that time, board members and investors have been happy to see that EPB’s network has been advantageous, proving itself as a wise investment.
The financial advisor mentioned that he is glad they “pulled the trigger on refinancing” because of the looming federal interest rate increase.
Though there is some debate about exactly when rates will increase, speculators and EPB’s financial advisors believe that it should take place in the next year or year and a half, making this the perfect time to refinance.
“With current bond rates as low as they are, it makes sense to reduce interest costs by refunding our existing bonds, much like a homeowner would refinance their house,” said EPB
Chief Financial Officer Greg Eaves. “This will enhance our ongoing efforts to keep electric rates as low as possible.”