In July 2010, PEG issued two series of 30-year fixed-rate gas system revenue bonds: tax-exempt Series 2010A for $2,425,000 and taxable Series 2010B for $19,305,000. The bond proceeds were used to finance the costs of acquiring, constructing and installing extensions and improvements to PEG’s gas facilities. PEG pledged its revenues as security for payment of the bonds. The Series 2010B bonds are Taxable Recovery Zone Economic Development Bonds wherein PEG pays a taxable rate and receives a semi-annual subsidy payment from the U.S. treasury under the American Recovery and Reinvestment Act of 2009 (ARRA). There is no guarantee of receiving the subsidy in the future. The total payments received were $603,466 and $622,000 in the years ended June 30, 2014 and 2013, respectively.
In December 2008, PEG refunded the Series 2006A bonds with Series 2008 variable-rate demand bonds for $32,455,000. Consistent with the prior series, the Series 2008 bond proceeds were used to finance the costs of acquiring, constructing and installing extensions and improvements to PEG’s gas facilities. PEG pledged its revenues as security for payment of the bonds. Upon the expiration of a three year agreement with Wells Fargo Bank, N.A. to furnish a direct pay letter of credit in support of the bonds, the Series 2008 bonds were reissued at par in December 2011 to TD Bank, N.A under a five-year agreement. TD Bank, N.A. will have the option to put the bonds back to PEG on December 1, 2016. In addition, PEG is required to maintain a deposit meeting certain annual average minimum balance limits as part of this transaction. At June 30, 2014 and 2013, PEG had a non-interest bearing deposit of $1,000,000 in satisfaction of that requirement. In June 2006, at the time of the original issue, PEG entered into a 30-year financing agreement with its Members to secure the financial covenants and assurances necessary to secure PEG’s indebtedness. Under the financing agreement, Members are obligated to pay all costs billed by PEG for its services.
As of June 30, 2014 and 2013, PEG was in compliance with the debt covenants associated with Series 2010A, 2010B and 2008 bonds.