The Public Energy Authority of Kentucky (PEAK) issued $862.4 million in bonds to refund a previous issuance and prepay for a long-term supply of natural gas.
The authority sold the vast majority of the bonds, about $812 million, at a fixed rate with maturities between 2028 and 2054, and yields between 4.24% and 4.54%. It sold an additional $50 million in bonds maturing in 2054 at the secured overnight financing rate (SOFR). The bonds are scheduled for mandatory tender on February 1, 2032. The securities received a rating of A1 from Moody’s Investors Service.
The authority will use proceeds from the sale of the bonds to purchase a long-term gas supply from Morgan Stanley Energy Structuring, LLC, a subsidiary of Morgan Stanley & Co LLC.
PEAK’s purpose is to “develop, acquire, finance and promote secure, reliable and economic sources and supplies of natural gas for the benefit of the Members and other public agencies,” according to the official statement accompanying the sale of the bonds.
PEAK supplies energy to its two members, as well as dozens of other municipalities in Kentucky, at below-market rates. The small cities of Carrollton and Henderson are the only members of PEAK.
The bond proceeds will also refund securities PEAK issued in 2018.
The bonds are special and limited obligations of PEAK, payable by revenue from gas sales to Kentucky municipalities.
Morgan Stanley & Co LLC served as underwriter on the issuance, purchasing the bonds for $896.5 million. The price reflected a premium of $38.5 million and a discount of $4.4 million. Municipal Capital Markets Group, Inc acted as financial advisor.