Allegheny Energy Inc. (AYE) issued $85.9 million of environmental control bonds through two of its affiliates. The affiliates, MP Environmental Funding LLC and PE Environmental Funding LLC, will issue $64.4 million and $21.5 million of the bonds, respectively. The bonds will carry a coupon rate of 5.127% and are scheduled to mature in Jan 2030.

The bonds are backed by an irrevocable financing order from the Public Service Commission of West Virginia, Standard & Poor’s, Moody’s (MCO) and Fitch Ratings are expected to assign the bonds their highest credit ratings.

Allegheny expects the transaction to close on Dec 23, 2009. Net proceeds from the sale of the bonds will finance certain costs related to the construction and installation of flue gas desulphurization (scrubber) equipment at the Fort Martin Power Station near Morgantown, West Virginia.

The scrubbers will reduce sulfur dioxide emissions by approximately 95% at the Fort Martin facility. The power station provides electricity primarily to subsidiaries – Monongahela Power Company and Potomac Edison Company, which serve Allegheny Power customers in West Virginia.

Headquartered in Greensburg, Pennsylvania, Allegheny Energy is an electric utility company with over $3 billion in annual revenues. The company is engaged in both regulated electricity and natural gas distribution utility operations as well as in the unregulated wholesale energy markets. It owns and operates generating facilities and supplies electricity to approximately 1.6 million customers spread across the states of Pennsylvania, West Virginia, Maryland and Virginia. We reiterate our Neutral recommendation on the shares.

Going forward, Allegheny Energy’s positive investment factors include higher generation rates in Pennsylvania and Maryland, higher residential usage and ongoing transmission projects. Looking ahead, we expect that the company’s regulated delivery utility business will provide steady earnings growth while the disposal of retail distribution operations in Virginia will infuse liquidity. However, the positives would be offset by lower industrial demand and higher emission and hedging costs. We reiterate our Neutral recommendation on the low dividend yield stock.

Zacks Investment Research

1. (AYE) Allegheny Energy Gets Regulatory Approval for Rate HikeAllegheny Energy Inc. (AYE) bagged approval from the Virginia State Corporation Commission to recover its...
2. (AYE) Allegheny Energy Revises Rate HikeAllegheny Energy Inc. (AYE) yesterday scaled down its proposed rate hike in Virginia . Earlier,...
3. (AYE) Allegheny Energy Announces Debt IssueAllegheny Energy (AYE) yesterday announced that its unregulated generation subsidiary Allegheny Energy Supply Company LLC...
4. (AYE) Allegheny Seeks Cost RecoveryAllegheny Energy, Inc.’s (AYE) electric delivery business unit, Allegheny Power, yesterday filed a petition with...
5. (DUK) Duke Energy Issues BondsDuke Energy Corp. (DUK) recently raised the size of its senior notes offering to $1...
6. (AYE) Allegheny Seeks Higher Base RateAllegheny Energy (AYE) recently appealed to the Public Service Commission of West Virginia for a...

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