120 



Mr. DeFazio. I thank the gentleman. 



We will start first with the repa3rment issue or the refinancing 

 issue. We have had a number of discussions regarding this, and — 

 this is problematic. I will ask a couple of questions, and I will take 

 a brief recess. I doubt I will be able to finish before I have to go 

 vote. 



Regarding the concerns I had about issuance, we understand the 

 net present value discount, the $100 million transaction cost or 

 whatever one would have it called. In terms of the issuance costs, 

 there are a couple of concerns I have. One I have raised before, but 

 I would like to get it on the record. 



I have raised concerns regarding ESA and other things, and won- 

 dered how Wall Street would look at future obligations or potential 

 obligations of BPA, and whether or not there could be some unan- 

 ticipated premium that would be placed upon us, what sort of rat- 

 ing we could get in terms of the bonds, those sort of things. Would 

 you care to address that? 



Mr. Hardy. I don't believe that our ESA obligations, although 

 they are somewhat open-ended, would have any significant and 

 material affect on our bond rating. We have some basis for saying 

 that. The Washington Power Supply System presently has a dou- 

 ble-A bond rating for the bonds on WPPSS I, II, and III, which are 

 all backed by us. That is far more a reflection of Bonneville's credit 

 than it is of the Supply System's credit. And if we can maintain 

 a double-A rating with an agency that has gone through the largest 

 municipal bond default in history, I guess I would say that the 

 market has pretty good confidence in Bonneville's financial capabil- 

 ity and credibility. 



The market is well aware of our Endangered Species Act obliga- 

 tions. We still retained that indirect double-A bond rating, and I 

 don't anticipate the debt refinancing in the face of those obligations 

 would change that kind of credit rating, Mr. Chairman. 



Mr. DeFazio. The legislation, as I understand it, or the proposal 

 made by the administration, would give discretion to the adminis- 

 trator in terms of whether or not to go forward with a particular 

 issuance or continue to refinance, I guess, having to do with unan- 

 ticipated contingencies. How do you look at that discretion and 

 under what conditions might you use it? 



Mr. Hardy. Is that relative to the timing of the issue for the out- 

 standing debt, or 



Mr. DeFazio. I read it a little more broadly, which is basically 

 kind of open-ended. It seems to me there is enough discretion there 

 that you could determine, say there is some extraordinary occur- 

 rence regarding the market or, you know, some problems that 

 arose that were unanticipated, and large premiums were placed 

 upon our debt or our issuance that you could say, well, you know, 

 I am suspending refinancing at this point. 



Mr. Hardy. That is true. The bill as written is permissive. It 

 does not say the Administrator will; it says the Administrator may 

 go forward with this. And I think the flexibility that we have be- 

 yond that basic "go/no go" sort of decision is that we, in consulta- 

 tion with Treasury, will determine the time phasing of the various 

 issuances. If there are extraordinary market conditions or whatnot. 



