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Tennessee Energy Company Sells $634 Mln in Bonds

By Munichain News Desk

The Tennergy Corporation issued $633.6 million in bonds to finance a long-term supply of natural gas for municipalities in Tennessee.

The corporation sold $624.2 million in tax-exempt bonds and $9.5 million in taxable bonds. The tax-exempt bonds mature between 2028 and 2054, yielding between 3.95% and 4.05%. They face a mandatory tender in 2029. The taxable bonds mature between 2025 and 2028, yielding between 5.95% and 6%. The securities received a rating of Aa1 from Moody’s Investors Service.

Tennessee is increasingly turning to natural gas as it phases out coal-powered energy suppliers. Tennessee’s consumption of natural gas has more than doubled since 2012, and its coal consumption halved during the same period, according to the U.S. Energy Information Administration. But the state does not have any proven natural gas reserves, so it relies on purchases to meet its natural gas needs.

Tennergy will use the bond proceeds to purchase a thirty-year supply of natural gas from the Royal Bank of Canada (RBC). It will then resell that gas to municipal utilities and public utility districts at “competitive prices,” according to the company’s website. The company says that bond-funded prepayment projects allow public gas systems to receive a discount on monthly gas pricing.

The company will also use the proceeds to refund bonds that it sold in 2019.

The bonds are special limited obligations of Tennergy, payable by gas sales to Tennessee municipalities.

RBC Capital Markets, LLC served as underwriter on the issuance, purchasing the bonds for $658.7 million. The price reflected a premium of $28.4 million and a discount of $3.4 million. Mohanty Gargiulo LLC acted as financial advisor.

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