The Bond Buyer

December 10, 2003, Wednesday

SECTION: THE REGIONS; Pg. 3

LENGTH: 598 words

HEADLINE: N.Y. Liberty Board Likely to Green-Light $600M Power Deal 

BYLINE: By Michael McDonald

BODY:
The board of New York's Liberty Development Corp. is expected to give preliminary approval tomorrow to the sale of up to $600 million of Liberty bonds to help finance the building of a controversial 1,000 megawatt power plant in New York City.

The deal is significant as it represents the first time Liberty bonds will be approved for a power project. It would also use up a chunk of the $2 billion from the $8 billion Liberty bond program that can be used for projects outside of the Liberty zone, which is in lower Manhattan below Canal Street.

The New York City Industrial Development Agency has already given preliminary approval to two commercial real estate projects totaling $763 million that are outside of the zone. In March, the Liberty Development Corp., which New York's Empire State Development Corp. operates, established criteria for using tax-exempt Liberty bond authorization for independent power projects.

"We believe that this is a very important project for the city and for energy supply in the city," said Frances Walton, the ESDC's chief financial officer.

The Liberty Development Corp., which the state established after the Sept. 11, 2001, terrorist attacks to administer Liberty bonds for commercial development, held a public hearing on the power plant Monday evening. According to the public hearing notice, up to $600 million in taxable or tax-exempt bonds would be sold for the benefit of Astoria Energy LLC to help finance a 1,000 megawatt plant.

Tomorrow the Liberty Development Corp. is holding a board meeting and is expected to approve a declaration of intent to finance the project. The board must still give final approval in order for any bonds to be sold.

Astoria Energy is a subsidiary of SCS Energy LLC. The company, according to its Web site, has proposed building a plant at a brownfield site in Astoria, a neighborhood in the New York City borough of Queens. The sitting board of the state's Public Service Commission approved a 1,000 megawatt, natural-gas fired, combined-cycle generating facility for the company two years ago, according to the PSC's Web site.

According to trade media reports, the investor-owned electric utility Consolidated Edison in May awarded a contract to SCS Energy to supply 500 megawatts of energy and capacity under a 10-year contract beginning May 1, 2006.

Astoria Energy could not be reached for comment.

Following the Con Ed contract, the company awarded a $570 million, negotiated fixed-price contract to Stone & Webster Inc. to provide engineering, procurement and construction services for phase one of the Astoria power plant. Project Finance Magazine reported last month that Astoria Energy retained Credit Suisse First Boston and Pace Global to help line up financing.

While the company appears to need only to finalize the financing to move ahead, it is still evoking community opposition. For instance, state Assemblyman Michael Gianaris, D-Astoria, testified against using Liberty bonds for the project and his spokesman said yesterday the assemblyman is considering filing a lawsuit to stop it.

The federal government created the $8 billion Liberty bond program to help rebuild lower Manhattan after the terrorist attacks. The program, which authorized a form of tax-exempt private-activity bonds beyond the cap on such debt, set aside $6.4 billion for commercial projects and $1.6 billion for residential rental projects. The authorization expires Jan. 1, 2005.