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With Astoria Energy facing a March 31 deadline for securing financing, the board of New York's Liberty Development Corp. on Friday voted to sell taxable variable-rate revenue notes ahead of $400 million of tax-exempt, long-term Liberty bonds.
According to a resolution the board adopted, Astoria Energy has to "close on all financing arrangements reasonably necessary for the engineering, procurement, and construction of the project by March 31," in order to meet the conditions in a power purchase agreement it has with Consolidated Edison Inc.
To keep the controversial project alive, the Liberty Development Corp. board authorized selling up to $800 million of taxable notes before the end of the month, "pending the issuance of Liberty bonds."
The board had approved the sale of up to $400 million of tax- exempt Liberty bonds in December, but -- according to documents from Friday's board meeting -- investment bankers involved in the deal said "that it is not feasible to structure a Liberty Bond transaction by the end of March."
J.P. Morgan Securities Inc. is Astoria Energy's banker on the bond sale. Bankers there could not be reached Friday for comment and Liberty Development Corp. officials would not comment on the documents.
Astoria Energy has state Public Service Commission approval to build a 1,000-megawatt, natural gas-fired power plant in Queens and a 10-year contract starting in 2006 to supply Con Ed with up to 500 megawatts of electric power capacity. The company has estimated that completing the first 500 megawatts of the project will cost $844.7 million.
To finance the $844.7 million, it proposed in December to the Liberty Development board to use $400 million in Liberty bonds, $60 million in taxable bonds, $110 million in subordinated debt, and private equity of $275 million.
The Liberty Development Corp. is a subsidiary of the Empire State Development Corp., the state's economic development agency, which is controlled by Gov. George E. Pataki. The corporation has access to $3.2 billion of the $8 billion in tax-exempt Liberty bond authorization -- a form of private-activity bonding authority the federal government approved to help rebuild lower Manhattan after the Sept. 11, 2001, terrorist attacks.
Of the $8 billion in Liberty bonds, $2 billion can be used for commercial projects outside lower Manhattan, including certain power projects.
On Feb. 20, Astoria Energy informed the Public Service Commission in a filing that AE Investors LLC, Montreal-based SNC-Lavalin Group Inc., and Caisse de Depot et Placement du Quebec agreed to invest in the project. Astoria Energy has asked the PSC to either approve the private equity arrangement or decline further review.
The board of the PSC has the item on its agenda for its monthly meeting, which is tomorrow.
While it has received the state's permission, Astoria Energy's proposed power project has continued to evoke community opposition in Queens. On Friday, Assemblyman Michael Gianaris, D-Astoria, said that a lawsuit seeking to stop the sale of Liberty bonds for the project is imminent.
"Whoever fronts them money in anticipation of Liberty bonds is going to be in for a rude awakening," Gianaris said. "We've been confident that the federal law that authorizes Liberty bonds does not permit their use for power projects outside lower Manhattan." Copyright 2004 Thomson Media Inc.
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