YEC to borrow $100 million in bonds

The Yukon Energy Corporation is trying to secure a $100-million bond deal for future power projects. That's almost twice the previously disclosed amount of $5.

The Yukon Energy Corporation is trying to secure a $100-million bond deal for future power projects.

That’s almost twice the previously disclosed amount of $52.5 million that Yukon Energy president David Morrison said the corporation was seeking in bonds last week.

Back then, the utility and its holding company, the Yukon Development Corporation, were only looking at financing their share of the Mayo B project through bonds.

Now, they’ve set their sights on double that amount to finance the Stewart Crossing to Pelly Crossing transmission line and other projects.

This is the first time Yukon Development Corp., which will be the signatory on any bond arrangement with a bank, has dabbled in the bond market.

But it’s the only way to get financing over three decades, said Yukon Energy spokesperson Janet Patterson in an e-mail.

“Banks typically don’t give 30-year loans, which is what Yukon Development Corp. is seeking,” she said.

Yukon Energy didn’t have to take out bonds for its other large projects because it didn’t build them. They were handed to the corporation as “legacy projects” built during the Northern Canada Power Commission era, which closed shop in the mid-1980s.

Bonds are a common financing method for other public utilities, said Patterson.

Yukon Development Corp. and Yukon Energy don’t have any idea how much people will put into the bonds.

But Morrison estimated that regular Yukoners might buy anywhere between $5 million or $10 million of the bonds, he said last week.

The bond will likely have a five to 5.5 per cent interest rate over 30 years, he said.

The money for Mayo B dam expansion will still be $52.5 million, said Patterson.

Yukon Development Corp. will then give that money to Yukon Energy, but the sum will consist of two parts.

The first parts—$36 million—will be considered a loan, which Yukon Energy will pay back to Yukon Development Corp.

The principal and interest on that $36-million loan won’t end up on power bills, said Patterson.

That expense will be offset by the added industrial customers whom Yukon Energy can accommodate with the extra five to 10 megawatts Mayo B will produce, she said.

The remaining $16.5 million that Yukon Energy will keep from Yukon Development Corp.‘s bond deal to finance Mayo B will be covered by taxpayers. The Yukon government will give Yukon Development Corp. money from its coffers to pay for it.

Yukon Energy is also currently negotiating with Na-Cho Nyak Dun First Nation as a potential investor in the Mayo B project.

If Na-Cho Nyak Dun does provide capital to build the project, Yukon Development Corp. will decrease the money it will lend to Yukon Energy.

But Patterson couldn’t give a figure because no deal has been finalized.

The federal government has agreed to chip in $53 million for Mayo B and $18 million for the Stewart Crossing to Pelly Crossing transmission line.

The rest of Yukon Development Corp.‘s $100-million bond arrangement will help pay for the transmission line, as well as other projects like the Gladstone Diversion and increasing water output from the Southern Lakes into the Whitehorse dam, said Patterson.

It could also finance a geothermal project or more wind turbines, she said.

But all of those projects are at “very early concept stages,” so Yukon Energy isn’t sure what might get built, she said.

Contact James Munson at