Five utility holding companies secure $4.6 billion in term loans, Dominion the latest

Dominion Energy has joined American Electric Power, Xcel Energy and others in securing one-year term loans to fund ongoing operations as utility holding companies combat the impact of the coronavirus pandemic by seeking to increase liquidity and maintain employment levels.

According to corporate filings, five utility holding companies have received $4.62 billion in one-year term loans since March 19. The five are Duke Energy, American Electric Power, Xcel Energy, Edison International and Dominion Energy. The total does not include money raised through debt issues or credit line drawdowns.

A term loan is a loan from a bank for a specific amount with a specified repayment schedule. In the case of the utility holding company term loans announced thus far, all have been for one year.

Dominion, which has a workforce of about 20,000, told the US Securities and Exchange Commission it entered into a $625 million, 364-day term loan on April 1.

The two largest term loans went to Duke Energy and AEP, respectively.

Duke announced on March 19 it had secured a $1.5 billion term loan. Spokesman Neil Nissan said Monday: "Despite the significant market volatility over the past several weeks, we've maintained adequate liquidity. We were able to raise that recent capital at historically low borrowing rates." He said that the "majority of the funding" will be used to reduce Duke's commercial paper balances.

Duke, which has a workforce of about 29,000 people in seven states, began sending non-critical personnel home on March 16, and has not had any furloughs, layoffs or pay reductions, Nissan said.

On March 23, AEP announced it had reached an agreement with banks on a $1 billion term loan. A day later, Edison International told the SEC it had reached an agreement on an $800 million term loan facility to be used for general corporate purposes, but also possibly for debt repayment.

Its loan agreement was with JPMorgan Chase Bank, which acted as administrative agent, and with Citibank, which acted as syndication agent.

Edison's term loan matures on March 19, 2021, and bears an interest rate "at either a Euro dollar rate or a base rate plus a margin of 1.125% or 0.125%, respectively."

NET GAIN FROM MANKATO SALE

Xcel, which on March 23 entered into a 364-day, $700 million term loan agreement with the US Bank and several other lenders, said Monday it is selling its 760-MW Mankato Energy Center to Denver-based independent power producer Southwest Generation for $680 million.

Xcel, which has a workforce of about 11,690, said the proceeds from the sale "will primarily be used to reduce Xcel Energy's overall financing needs and improve the company's credit metrics, with the net gain from the sale to fund its corporate giving and COVID-19 relief efforts."

The combined-cycle facility in Blue Earth County, Minnesota, will continue to sell its output to Xcel subsidiary Northern States Power under two long-term power purchase agreements.

Xcel said the sale of the facility is expected to close in the third quarter of 2020 and is not expected to have a material impact on short or long-term earnings. "Current employees are expected to continue working at the plant and Xcel Energy will continue buying power from the facility," it added.

Xcel's term loan facility is unsecured, has a term of 364 days ending on March 22, 2021, and can be extended for one additional 364-day period to March 21, 2022, it said.

"Loans under the term loan facility shall bear interest at a rate equal to either the Eurodollar rate, plus a margin equal to 60.0 basis points or an alternate base rate," it added.

The term loan has one financial covenant. Xcel is required to keep its consolidated funded debt to total capitalization ratio at less than or equal to 65%.