Staff Report Item 16
Staff Report Item 16
TO: East Bay Community Energy Board of Directors
FROM: Howard Chang, Chief Operating Officer & Treasurer SUBJECT: Energy Prepay Transaction #2 Summary of Results (Informational) DATE: July 20, 2022
__________________________________________________________________ Recommendation
Receive an informational item to summarize the results of EBCE’s second energy prepay transaction.
Background and Discussion
On May 18, 2022, EBCE approved moving forward with its second energy prepay transaction.
Subsequently on May 26, 2022 CCCFA (the debt issuance conduit) approved moving forward with the transaction as well. Working with Morgan Stanley as the bond underwriter, we successfully priced the bonds on June 28, 2022 and closed the prepay transaction on July 12, 2022.
Details of the transaction are below.
Total Bond Proceeds: $938,984,208.65
Start Date: April 1, 2023
Tenor of the initial bonds: 6 years
Cost of Issuance: 0.61%
Total Annual Savings for Initial Term: $4,809,240
This transaction is EBCE’s second prepay transaction and is the third prepay transaction that CCCFA has issued. Together with the savings from EBCE’s initial prepay transaction, EBCE has secured annual savings of over $7MM, which represents nearly a 1% discount to all EBCE customers. Both prepay transactions are 30 energy contracts. The savings from this second prepay transaction are locked in until 2029, which is when the bonds will need to be repriced, and the future discount will be based on market conditions at that time. The savings from the first transaction are locked in until 2032 because it closed on 10-year bonds.
Staff Report Item 16
Through the energy prepay transaction this discount is being applied to a variety of long and short-term renewable energy and large hydro contracts that EBCE is assigning into the structure. Based on the number of eligible source-specified PPAs under contract, EBCE will seek to continue to execute additional prepay transactions in the coming years to maximize the available savings.
EBCE’s board approved and adopted a resolution subject to the following parameters:
(a) the Bonds will not be obligations of EBCE, but will be limited obligations of the Issuer payable solely from the revenues and other amounts pledged therefor under the Indenture, including amounts payable by EBCE under the Power Supply Contract; (b) the aggregate principal amount of the Bonds shall not exceed $1,000,000,000; (c) the annual energy savings to EBCE under the Power Supply Contract shall be at least $4.50 per MWh
The executed transaction complies with all aspects of the resolution with a principal amount of $931,120,000 and savings of over $7.30/MWh.
Previous Background Information:
An energy prepayment is a long-term financial transaction available to municipal utilities and tax-exempt entities such as CCAs that enables a meaningful power procurement cost savings opportunity. This prepay structure has historically been utilized for natural gas procurement and is now being applied towards renewable energy. To date, EBCE, Silicon Valley Clean Energy (SVCE), and MCE have executed prepay transactions and currently a number of other CCAs are also in the process of initiating a similar structure.
Financial Impact
There is no financial impact related to receiving this informational item.
Attachments
None