3. Request
In its application, SDG&E sought authorization to issue up to $800 million of Debt Securities and up to $150 million of Preferred or Preference Stock, in addition to previously-authorized amounts, until the aggregate principal amount authorized has been fully utilized to meet its future financing needs based on a long-term forecast covering the three-year period 2010 through 2012. The principal amount, form, terms, and conditions of each series of Debt Securities will be determined by SDG&E's management or Board of Directors according to market conditions at the time of sale or issuance. In general, each series of medium-term notes are expected to have a maturity of between nine months and 40 years, while each series of long-term Debt Securities are expected to have a maturity of between one and 100 years. SDG&E states that, as a rule, it would not issue medium-term notes with a maturity of less than 12 months, and that it plans to issue its requested debt in the current application in conformance with Public Utilities (Pub. Util.) Code §§ 817 and 818.
SDG&E indicated that it intends to issue Debt Securities as: First Mortgage Bonds; medium-term notes; debentures; direct long-term notes pursuant to a line of credit with banks, insurance companies or other financial institutes; accounts receivable financing; tax-exempt debt issued through one or more political subdivisions; variable rate debt; subordinated debt; "Fall-Away" mortgage bonds; overseas indebtedness; hybrid capital; and foreign securities; and issuing such indebtedness as secured or unsecured in both domestic or foreign markets. SDG&E also proposes to issue Debt Securities through SDG&E regulated affiliates or regulated subsidiaries, and political subdivisions, and guarantee the securities or other obligations of SDG&E's regulated affiliates or regulated subsidiaries identified as Special Purpose Entities (SPE), and political subdivisions that issue securities on behalf of SDG&E.
SDG&E proposes to issue new par or stated-value Preferred or Preference Stock through an offering and sale to the public either with negotiated underwritings or by private placements with institutional or other investors. SDG&E has not yet determined the precise amount and timing of each placement, and the securities' features have not been finally determined. They will be established by SDG&E prior to the offering with due regards for its funding requirements and the prevailing and anticipated market conditions. SDG&E anticipates that the terms and conditions of such securities may include, but not be limited to, preference, dividends, redemption provisions, capital replacement, and trust structures.
SDG&E proposed to use it new financing authority to fund capital expenditures and reimburse its treasury for monies actually expended from income or from any other money in its treasury not secured by or obtained from the issue of stocks or stock certificates or other evidence of interest or ownership, or bonds, notes, or other evidence of indebtedness for expansion and betterment of its facilities, with the amounts so reimbursed becoming part of its general treasury funds. In particular, SDG&E plans to make a substantial investment in infrastructure in order to, among other things: serve an increasing load; improve reliability; meet its renewable portfolio standard goals; reduce congestion costs; connect new generation; and upgrade and modernize aging infrastructure.
SDG&E also sought authorization to encumber utility property, including but not limited to accounts receivables and utility property to secure Debt Securities authorized herein. In order to manage interest rate risk, SDG&E proposes to utilize Debt Securities enhancement features including put options, call options, sinking funds, swaptions,1 caps, collars, currency swaps, credit enhancements, capital replacement, interest deferral, special-purpose entity transactions,2 delayed drawdown, hedging strategies, treasury lock, various types of treasury options, various types of interest rate swaps, and long hedges. SDG&E also proposes to utilize Preferred or Preference Stock enhancement features, including preference and redemption provisions, capital replacement, and special purpose transactions. Additionally, SDG&E seeks a partial exemption from the Commission's CBR.
1 The option to enter into a swap.
2 A special-purpose entity would be a regulated affiliate or subsidiary of SDG&E that would issue securities and commit the proceeds from the issuance of such to SDG&E. These securities may be guaranteed by SDG&E.
