HEADLINE: N.Y.C.'s Astoria Energy to Sell $700M In Notes While Awaiting Liberty Bonds  

BYLINE: By Michael McDonald

Astoria Energy is getting set to sell around $700 million in taxable, variable-rate revenue notes next week through New York's Liberty Development Corp. to begin the construction of a power plant in New York City. At the same time, the company said that in the coming months it expects to sell up to $400 million in tax-exempt Liberty bonds to refinance a portion of the notes.

Christopher McGrath, president of New York Capitol Consultants, which represents SCS Energy Inc., the parent of Astoria Energy, said the company hopes to sell the notes next week and that "Liberty bond financing is a longer-term component" of the proposed power project. The total cost of the project is expected to be $844.7 million.

Credit Suisse First Boston is selling the taxable notes, and McGrath said that J.P. Morgan Securities Inc. remains as the senior banker for the proposed Liberty bond deal.

On Tuesday, the board of the state's Public Service Commission approved the sale of the notes and a change in ownership structure for Astoria Energy. As reported Monday in The Bond Buyer, three new investors have recently agreed to take a stake in the project - AE Investors LLC, SNC Lavalin Group Inc., and Caisse de Depot et Placement du Quebec.

The public service commission also said Tuesday that it would, as requested, treat Astoria Energy "with the reduced scrutiny appropriate to lightly-regulated wholesale generators." The commission's siting board two years ago approved the company's application to build a 1,000-megawatt, natural gas-fired, combined-cycle generating facility in the Astoria neighborhood in Queens.

Also this week, the commission said it would meet next Thursday to consider a petition filed by the New York Institute of Legal Research, state Assemblyman Michael N. Gianaris, D-Astoria, and the United Community Civic Association for Multiple Relief that raises questions about changes in the power project.

Gianaris has also threatened to file a lawsuit to block Liberty bond financing, saying that the Liberty Development Corp. cannot legally sell bonds for a power project outside of lower Manhattan. The corporation, a subsidiary of the Empire State Development Corp. controlled by Gov. George E. Pataki, has access to $3.2 billion of the $8 billion in Liberty bonds the federal government authorized to help rebuild New York City after the Sept. 11, 2001, terrorist attacks.

Of the $8 billion, $2 billion can be used for commercial projects outside lower Manhattan.

According to Astoria Energy's application for financing with the Liberty Development Corp., the company is planning to invest $844.7 million in constructing a 100,000-square-foot building that would accommodate a 1,000-megawatt electric generating facility. However, the company is only planning to initially install a 500-megawatt generator, based on a 10-year supply contract with Consolidated Edison Inc.

According to the contract with Con Ed, Astoria Energy needs to have financing in place before March 31. Under the financing plan submitted to the Liberty Development Corp., the company initially planned to finance the $844.7 million project with $400 million in Liberty bonds, $60 million in taxable bonds, $110 million in subordinated debt, and private equity of $275 million.

The company opted to sell around $700 million in taxable notes because it needed to have financing in place by March 31 or risk losing the Con Ed power supply contract. It is still working on clearing the way for a Liberty bond sale which, among other things, requires an underlying investment-grade credit rating.

McGrath said the details of the note financing, for instance the liquidity support and terms of the deal, will not be released until next week.