Long-Term Debt and Financing Obligations

Outstanding long-term debt and financing obligations are as follows:



	December 31,
	2016			2015 (1)
	(In thousands)
Long-Term Debt:
Pollution Control Bonds (2):
7.25% 2009 Series A refunding bonds, due 2040 (7.46% effective interest rate)	$	62,619		$	62,582
4.50% 2012 Series A refunding bonds, due 2042 (4.63% effective interest rate)	58,471			58,441
7.25% 2009 Series B refunding bonds, due 2040 (7.49% effective interest rate)	36,492			36,465
1.875% 2012 Series A refunding bonds, due 2032 (2.35% effective interest rate)	33,193			33,011
Total Pollution Control Bonds	190,775			190,499
Senior Notes (3):
6.00% Senior Notes, net of discount, due 2035 (7.12% effective interest rate)	393,861			393,693
7.50% Senior Notes, net of discount, due 2038 (7.67% effective interest rate)	147,331			147,282
3.30% Senior Notes, net of discount, due 2022 (3.43% effective interest rate)	148,939			148,783
5.00% Senior Notes, net of discount, due 2044 (4.93% effective interest rate)	302,955			147,717
Total Senior Notes	993,086			837,475
RGRT Senior Notes (4):
4.47% Senior Notes, Series B, due 2017 (4.62% effective interest rate)	49,950			49,883
5.04% Senior Notes, Series C, due 2020 (5.16% effective interest rate)	44,845			44,803
Total RGRT Senior Notes	94,795			94,686
Total long-term debt	1,278,656			1,122,660
Financing Obligations:
Revolving Credit Facility ($81,574 due in 2017) (5)	81,574			141,738
Total long-term debt and financing obligations	1,360,230			1,264,398
Current Portion (amount due within one year):
Current maturities of long term debt	(83,143		)	—
Short-term borrowings under the revolving credit facility	(81,574		)	(141,738		)
	$	1,195,513		$	1,122,660

_____________________

(1)

The Company implemented ASU 2015-03, Interest - Imputation of Interest, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The impact of ASU 2015-03 on the Company's Balance Sheet was to reclassify $11.6 million of other deferred charges to long-term debt, net of current portion at December 31, 2015.


(2)	Pollution Control Bonds ("PCBs")

The Company has four series of tax exempt unsecured PCBs in aggregate principal amount of $193.1 million. The 1.875% 2012 Series A (El Paso Electric Company Four Corners Project) Pollution Control Refunding Revenue Bonds with an aggregate principal amount of $33.3 million are subject to mandatory tender for purchase in September 2017 at which time the Company will either repay or remarket these bonds.


(3)	Senior Notes

The Senior Notes are unsecured obligations of the Company. They were issued pursuant to bond covenants that provide limitations on the Company’s ability to enter into certain transactions. The 6.00% Senior Notes have an aggregate principal amount of $400.0 million and were issued in May 2005. The proceeds, net of a $2.3 million discount, were used to fund the retirement of the Company's first mortgage bonds. The Company amortizes the loss associated with a cash flow hedge recorded in accumulated other comprehensive income to earnings as interest expense over the life of the 6.00% Senior Notes. See Part II, Item 8, Financial Statements and Supplementary Data, Note O. This amortization is included in the effective interest rate of the 6.00% Senior Notes.

The 7.50% Senior Notes have an aggregate principal amount of $150.0 million and were issued in June 2008. The proceeds, net of a $1.3 million discount, were used to repay short-term borrowings of $44.0 million, fund capital expenditures and for other general corporate purposes.

The 3.30% Senior Notes have an aggregate principal amount of $150.0 million were issued in December 2012. The proceeds, net of a $0.3 million discount, were used to fund construction expenditures and for working capital and general corporate purposes.

In December 2014, the Company issued 5.00% Senior Notes with an aggregate principal amount of $150.0 million. The proceeds, net of a $0.5 million discount, were used to fund construction expenditures and for working capital and general corporate purposes. In March 2016, the Company issued additional 5.00% Senior Notes with an aggregate principal amount of $150.0 million. The proceeds from this issuance, after deducting the underwriters' commission, were $158.1 million. These proceeds included accrued interest of $2.4 million and a $7.1 million premium before expenses. The net proceeds, from the sale of these senior notes were used to repay outstanding short-term borrowings under the RCF. After the March 2016 issuance, the Company's 5.00% Senior Notes due 2044 had a total principal amount outstanding of $300.0 million.


(4)	RGRT Senior Notes

In 2010, the Company and RGRT, a Texas grantor trust through which the Company finances its portion of fuel for Palo Verde, entered into a note purchase agreement with various institutional purchasers. Under the terms of the agreement, RGRT sold to the purchasers $110 million aggregate principal amount of Senior Notes (the "Notes"). In August 2015, $15.0 million of these Notes matured and were paid with borrowings from the RCF. In August 2017, $50.0 million of these Senior Notes will mature. The Company will either repay or refinance this $50.0 million of Notes upon maturity. The Company guarantees the payment of principal and interest on the Notes. In the Company’s financial statements, the assets and liabilities of RGRT are reported as assets and liabilities of the Company.

RGRT pays interest on the Notes on February 15, and August 15 of each year until maturity. RGRT may redeem the Notes, in whole or in part, at any time at a redemption price equal to 100% of the principal amount to be redeemed together with the interest on such principal amount accrued to the date of redemption, plus a make-whole amount based on the prevailing market interest rates. The agreement requires compliance with certain covenants, including a total debt to capitalization ratio. The Company was in compliance with these requirements throughout 2016.

The sale of the Notes was made by RGRT in reliance on a private placement exemption from registration under the Securities Act of 1933, as amended. The proceeds of $109.4 million, net of issuance costs, from the sale of the Notes was used by RGRT to repay amounts borrowed under the RCF and will enable future nuclear fuel financing requirements of RGRT to be met with a combination of the Notes and amounts borrowed from the RCF.


(5)	Revolving Credit Facility

On January 14, 2014, the Company and RGRT entered into a second amended and restated credit agreement related to the RCF with JP Morgan Chase Bank, N.A., as administrative agent and issuing bank, and Union Bank, N.A., as syndication agent, and various lending banks party thereto. As of December 31, 2016, the Company had available $300 million and the ability to increase the RCF by up to $100 million with a term ending January 2019. On January 9, 2017, the Company exercised its option to extend the maturity of the RCF by one year to January 14, 2020 and to increase the size of the facility by $50 million to $350 million. The Company still has the option to extend the facility by one additional year to January 2021 and to increase the RCF by up to $50 million (up to a total of $400 million) upon the satisfaction of certain conditions, more fully set forth in the agreement, including obtaining commitments from lenders or third party financial institutions.

The RCF provides that amounts borrowed by the Company may be used for, among other things, working capital and general corporate purposes. Any amounts borrowed by RGRT may be used, among other things, to finance the acquisition and processing of nuclear fuel. Amounts borrowed by RGRT are guaranteed by the Company and the balance borrowed under the RCF is recorded as short-term borrowings on the balance sheet. The RCF is unsecured. The RCF requires compliance with certain covenants, including a total debt to capitalization ratio. The Company was in compliance with these requirements throughout 2016. In August 2015, $15.0 million aggregate principal amount of Series A 3.67% Senior Notes of RGRT matured and were paid utilizing borrowings under the RCF. As of December 31, 2016, the total amount borrowed by RGRT was $37.6 million for nuclear fuel under the RCF. As of December 31, 2016, $44.0 million of borrowings were outstanding under this facility for working capital and general corporate purposes. The weighted average interest rate on the RCF was 2.0% as of December 31, 2016.

As of December 31, 2016, the principal amount of scheduled maturities for the next five years of long-term debt are as follows (in thousands):




2017	$	83,300
2018	—
2019	—
2020	45,000
2021	—

The $37.6 million of borrowings outstanding on the RCF for nuclear fuel financing purposes is anticipated to be paid in 2017.