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 Refunding of AWWU and ML&P Bonds Saves Ratepayers more than $38 Million over life of bonds 

12/16/2009 | Contact: Lucinda Mahoney (907) 343-6610
Mayor's Office
  • The Municipality's sale of Water Revenue Refunding Bonds for the Anchorage Water Utility in early December was extremely successful.
  • Refunding bonds is similar to refinancing a house to obtain a lower interest rate. The original bonds had interest rates between 4 percent and 6 percent. The newly issued bonds had a cost of funds of 3.23 percent, with interest rates ranging from 1.50 percent to 5 percent.
  • This refunding saves AWWU approximately $15 million over the life of the bonds.
  • The bonds are rated AA- by Fitch Ratings and AA by Standard & Poor’s and have maturities ranging from 2010 through 2023.
  • All the Bonds Were Sold to Retail (Individual) Investors or retail investor funds.


  • The Municipality issued $130 million of Senior Lien Electric Revenue Bonds for Municipal Light & Power in late November.
  • These bonds represent debt for capital projects including the Southcentral Power Project, replacement generation at ML&P Plants 1 & 2, reimbursement of capital expenditures made to date and in fulfilling the reserve requirement for the bonds.
  • The bonds included Build America Bonds authorized by the American Recovery and Reinvestment Act passed by Congress in February 2009. The Build America Bonds quality for a 35 percent interest payment subsidy from the federal government.
  • As a result of issuing the Build America Bonds with the federal subsidy, ML&P will save nearly $23 million in interest expense over 30 years.
  • The intent of the federal subsidy in the economic stimulus package was to help states and cities get moving on public works projects, creating jobs. The Build America Bonds subsidy is available only on higher-rate taxable bonds, not low-rate tax-exempt debt. The premise is that the higher interest rate associated with taxable bonds will attract additional investors that normally buy taxable debt rather than tax-exempt debt, typically issued by state and local governments. The higher-rate taxable bonds should make it easier for states and municipalities to sell their bonds in today's market. But with the federal subsidy of the interest rate, the actual cost to states and municipalities would be less than if they issued straight tax-exempt government bonds.
  • The bonds are rated A+ by Fitch Ratings and Standard & Poor's and have maturities ranging from 2019 through 2039.
  • The net cost of funds for this transaction is approximately 4.28 percent.

 Chief Fiscal Officer Lucinda Mahoney said, "We are extremely pleased with the market reception to our bond issue for ML&P and AWWU. The continued interest in the Municipality's debt reflects Alaska and national investors' confidence in the strength of our economy and in the Municipality of Anchorage, ML&P and AWWU."

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