PacifiCorp’s sale comes amid a flurry of primary-market activity in the first days of the new year. — Reuters
NEW YORK: Berkshire Hathaway Energy Co’s PacifiCorp sold US$3.8bil of US investment-grade bonds to help fund settlement claims related to wildfires in Oregon.
The electric utility issued debt in four parts, with the longest portion – a long 30-year fixed-rate note – yielding 175 basis points over comparable Treasuries, according to a person familiar with the matter, who asked not to be identified because they’re not authorised to speak about it.
Some of the funds will also go toward general corporate purposes, the person said.
PacifiCorp’s sale comes amid a flurry of primary-market activity in the first days of the new year, with 10 bondsellers announcing high-grade sales on Wednesday.
The announcement also comes just weeks after PacifiCorp said it would pay US$299mil to settle claims linked to wildfires that burned homes in south-west Oregon, averting another jury trial.
Investors approached the firm’s existing debt with a sense of cautiousness. The spread on the company’s 5.5% notes due May 2054 increased four basis points to 167 basis points, according to Trace bond trading data.
PacifiCorp’s credit rating was downgraded by S&P Global Ratings last June after investigations by federal agencies concluded that power lines operated by a PacifiCorp unit probably caused the destructive Archie Creek Fire in Oregon in 2020.
Bloomberg Intelligence predicts the company could still settle larger wildfire litigation for billions of dollars.
Even after the recent agreement to pay to settle claims in Oregon, S&P warned that the company’s BBB+ credit score, which is three steps above speculative grade with a negative outlook, is still at risk from legal developments surrounding wildfires in the company’s service territory.
“We could lower the ratings on PacifiCorp over the next 24 months if the number of claimants and estimated damages concerning its wildfire lawsuits” grows significantly, analyst Sloan Millman wrote in mid-December.
It’s not the first utility to tap debt markets to help pay for wildfire damage. Southern California Edison Co sold US$550mil in September to fund the payment of wildfire claims and related expenses.
Hawaiian Electric Co, meanwhile, saw its rating lowered into junk territory by Moody’s Investors Service after fires spread across Maui.
California utility PG&E Corp filed for bankruptcy in 2019 after collapsing under US$30bil in liabilities from wildfires sparked by its equipment.
PG&E issued debt to cover its own wildfire claims and expenses and won approval from regulators to sell US$7.5bil of bonds in 2021. — Bloomberg
