Lucas Torres Quoted in Law360 on Gaining Popularity of Coal Plant Closure Bonds

Akin Gump corporate partner Lucas Torres has been quoted in the Law360 article “Coal Plant Closure Bonds Gain Steam With Shift In Power Mix,” which looks at the potential securitization of bonds in order to speed up the closure of coal-fired power plants. It comes after new laws in New Mexico and Colorado would permit that to happen.

The article reports that finding higher-quality, long-term investments, other than a utility bond backed by state law, is not easy. Not only are the charges to ratepayers locked in place, but state regulators generally are not permitted to interfere with the utility’s rights to collect the charges and can adjust the charges to ensure the bond is fully paid off on time.

“It’s a mechanism whereby the state regulator has the ability to take a lot of the credit risk out of the deal such that you get Triple-A-rated debt, which means it has a lower interest rate than if the utility was financing it off its balance sheet,” said Torres, who has worked on utility securitizations.

It is, however, a balancing act for state lawmakers that decide to move forward with securitization in order to ensure ratepayers, utilities and potential bond investors get a fair deal, according to the article.

“It's a bit of a political dance for legislators,” Torres noted. “Each region, each company, each plant probably has its own separate facts and situation that may or may not be supported by the political environment.”