Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, June 26, 2024
11:00 a.m.
Visit CPA’s YouTube Channel to view a Live Stream of the Meeting www.youtube.com/@CPApublicmeetings
*There may be a streaming delay of up to 90 seconds. This is a view-only live stream.
Clean Power Alliance
Executive Conference Room
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Members of the public may also participate in this meeting at the following locations:
Camarillo City Hall
Administrative Conference Room
601 Carmen Drive
Camarillo, CA 93010
Claremont City Hall
Council Office
207 Harvard Avenue
Claremont, CA 91711
Thousand Oaks City Hall
City Manager’s Office, Council Office #1
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
Rolling Hills Estates City Hall
Conference Room
4045 Palos Verdes Drive North
Rolling Hills Estates, CA 90274
California Climate & Energy Collaborative Forum
Margaritaville Resort
Coconut Telegraph Center/ Business Center
1600 North Indian Canyon Drive
Palm Springs, CA 92262
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: The General Public Comment item is reserved for persons wishing to address the Committee on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called. Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Committee at CPA’s Office are requested to complete a comment card and provide it to staff. If you are attending from a remote location, please identify yourself to a CPA representative when your item is called. Each speaker is limited to two (2) minutes (in whole-minute increments) per agenda Agenda Page 1
item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, the entire Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
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ACCESSIBILITY: Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least two (2) working days before the meeting at [email protected] or (213) 713- 5995. Notification in advance of the meeting, while not required, will enable us to make reasonable arrangements to ensure accessibility to this meeting and the materials related to it.
CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from the May 29, 2024, Finance Committee Meeting
2. Receive and File May 2024 Risk Management Team Report
3. Receive and File May 2024 Investment Report
4. Receive and File April 2024 Financial Dashboard
REGULAR AGENDA
5. Report from the Chief Financial Officer
6. A. Recommend that the Board of Directors Approve up to Three Prepayment Transactions with either Goldman Sachs (GS), Morgan Stanley (MS), or Royal Bank of Canada (RBC) as CPA’s Underwriter & Prepaid Supplier, provided that Staff will be Authorized to Complete No More Than Three Transactions in Total B. Recommend that the Board of Directors Approve the Delegation of Authority to Staff to Select Funding Recipient(s) for Prepayment Transactions Completed with GS and/or MS; If RBC is selected as CPA’s Underwriter & Prepaid Supplier, RBC will also Serve as the Funding Recipient for any Prepayment Transactions Completed with RBC
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON JULY 24, 2024
Public Records: Public records that relate to any item on the open session agenda for a Committee Meeting are available for public inspection. Those records that are distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all, or a majority of, the members of the Committee. Public records are available for inspection at CPA’s Office at 801 S. Grand Ave., Suite 400, Los Angeles, CA 90017, or online at www.cleanpoweralliance.org/agendas. Agenda Page 2
Staff Report – Agenda Item 1
To: Finance Committee
Subject: Approve Minutes from May 29, 2024 Finance Committee Meeting Date: June 26, 2024
RECOMMENDATION
Approve.
ATTACHMENT
1. Minutes
Agenda Page 3
Finance Committee Item 1
MINUTES
Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, May 29, 2024, 11:00 a.m.
Meeting videos are available on CPA's YouTube Channel.
http://www.youtube.com/@CPApublicmeetings
Committee members participated in this meeting from the following locations:
Camarillo City Hall
Mayor’s Office
601 Carmen Drive
Camarillo, CA 93010
Clean Power Alliance
Executive Conference Room
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Claremont City Hall
Conference Room
207 Harvard Avenue
Claremont, CA 91711
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
Rolling Hills Estates City Hall
Conference Room
4045 Palos Verdes Drive North
Rolling Hills Estates, CA 90274
Thousand Oaks City Hall
City Manager’s Office, Council Office #1
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
CALL TO ORDER & ROLL CALL
Committee Chair Santangelo called the meeting to order at 11:00 a.m. and Gabby Monzon, Clerk of the Board, conducted roll call.
Roll Call
Camarillo Susan Santangelo Committee Chair Remote
Carson Reata Kulcsar Committee Member Remote
Claremont Corey Calaycay Committee Member Remote
Rolling Hills Estates Steve Zuckerman Committee Member Remote Santa Monica Pam O’Connor Committee Member Absent
Thousand Oaks David Newman Committee Member Remote
All votes are unanimous unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
Agenda Page 4
Finance Committee Item 1
CONSENT AGENDA
1. Approve Minutes from the April 24, 2024, Finance Committee Meeting
2. Receive and File April 2024 Risk Management Team Report
3. Receive and File April 2024 Investment Report
4. Receive and File FY 2023/2024 Q3 Financial Report
Motion: Committee Member Zuckerman, Rolling Hills Estates Second: Committee Member Newman, Thousand Oaks
Vote: The consent agenda was approved by a roll call vote.
REGULAR AGENDA
5. Report from the Chief Financial Officer
David McNeil, Chief Financial Officer, provided an update on the third quarter financial results for year to date (YTD) ending March 21, 2024, reporting that CPA was 20% ahead of budget for the quarter, and YTD contributed $126 million to the net position.
6. Recommend Approval of the Proposed FY 2024/2025 Budget to the Board of Directors Mr. McNeil presented the item, noting that budgeted revenues are expected to increase by $6 million year over year and reflect the rate setting approach approved by the Board at its May meeting, an allowance for bad debt, and the full year effect of default product changes and new community enrollments. Mr. McNeil reviewed operating expenses, noting increases in staffing, communications, and customer programs all oriented towards meeting CPA’s organizational priorities.
In response to Committee Member Zuckerman’s question about rising power purchase agreement (PPA) costs, Mr. McNeil explained that the budget includes contingencies to deal with unforeseen costs. Committee Member Newman asked about the impact of rising energy costs on revenues; Mr. McNeil explained that staff does conduct long-term financial projections which indicate that costs will stabilize over the next few years largely due to CPA’s long-term contracting activities. Once CPA meets its reserve target, it will also need to contribute less to reserve funds. In response to Committee Member Kulcsar’s question about Executive Committee feedback, staff explained it received feedback regarding debt collection, the credit rating process, and support for program and associated marketing spending.
Motion: Committee Member Calaycay, Claremont
Second: Committee Member Zuckerman, Rolling Hills Estates Vote: Item 6 was approved by a roll call vote.
7. Recommend to the Board that Staff be Authorized to Open a Bank Dealer Account with US Bank National Association for the Purpose of Investing Funds in Securities Authorized under CPA’s Investment Policy
Kate Freeman, Strategic Finance Manager, provided a presentation on the item. CPA has growing levels of cash and current interest rates offer attractive returns. Therefore, staff would like to invest through multiple dealers to compare interest rates and seek the highest returns.
Committee Member Newman asked about existing relationships with the proposed institutions; Ms. Freeman noted that CPA has a history of working with the proposed banking institutions in different capacities but often with different divisions of those institutions. In response to Committee Member Kulcsar’s inquiry about what would be Agenda Page 5
Finance Committee Item 1
invested, Ms. Freeman explained funds in CAMP or in savings funds that will not be needed in the short term would be invested in longer term securities. Mr. McNeil added that the initial purchase would be about $50 million, and staff will work towards $100 million. The monthly Investment Report presented to the Finance Committee will provide details on these investments consistent with CPA’s Investment Policy.
Motion: Committee Member Newman, Thousand Oaks
Second: Committee Member Zuckerman, Rolling Hills Estates Vote: Item 7 was approved by a roll call vote.
COMMITTEE MEMBER COMMENTS
None.
ADJOURN
Committee Chair Santangelo adjourned the meeting at 11:51 a.m.
Agenda Page 6
Staff Report – Agenda Item 2
To: Finance Committee
From: Lyon Hardgrave, Director, Energy Risk Management
Approved By: Ted Bardacke, Chief Executive Officer
David McNeil, Chief Financial Officer
Subject: Receive and File May 2024 Risk Management Team Report Date: June 26, 2024
May 2024 RMT REPORT
Key Actions
• Reviewed the counterparty credit exposure summary
• Reviewed February 2024 day-ahead load forecast performance • Reviewed April 2024 market performance
• Reviewed energy positions and approved 2024-2028 hedges for monthly RFO • Reviewed positions for Resource Adequacy (RA), RPS and Carbon-Free energy • products (CF)
• Update provided on 2024 Long Term PPA deliveries
• Reviewed the 2025-2027 slice of day RA position
• Reviewed Energy Risk Management Policy (ERMP) compliance for RA, REC, CF, and Energy
• Reviewed May 2024 CRR Allocations
• Reviewed and approved the Negative REC Price Strategy. RMT approved dropping the bid price of PCC1 REC to -$60
Policy Compliance
Policy Deviation Required Action
In December 2023, the
second quarter (April to
June) Energy Hedge
Position increased above
the maximum second
quarter hedge limit
starting in 2027 and
None.
The policy deviations arise from CPA continuing to enter into long term contracts for renewable energy consistent with its objective to reduce exposure to the short-term renewable energy market.
Agenda Page 7
Finance Committee Item 2
continuing in the second
quarter of each year
through the end of the
measurement window in
2033.
The deviations occurred during the second quarter
because electricity consumption by CPA customers is
projected to be at its lowest level in this quarter. The deviations are expected to resolve themselves as the
electricity production period nears and the corresponding policy hedge limit maximums increase above the level of energy hedges under contract.
During the upcoming 2024 ERMP review, staff will be
proposing an amendment to the ERMP, increasing the
maximum hedge limit in the second quarter of years that are four and more years in the future to eliminate policy deviations caused by load and generation patterns
specific to the second quarter.
In April 2024, the energy
hedge position for the third
quarter of 2027 (July to
September) exceeded the
maximum hedge limit for
that period.*
None.
This policy deviation arises from CPA continuing to enter into long term contracts for renewable energy consistent with its objective to reduce exposure to the short-term renewable energy market.
This policy deviation also arises from the latest load
forecast which includes a reduction in demand in Q3 2027 which increased CPA's hedge percentage for this period.
This deviation is expected to resolve itself as the electricity production period nears and the corresponding policy
hedge limit maximums increase above the level of energy hedges under contract.
*This policy deviation was inadvertently omitted from the April 2024 RMT report.
ATTACHMENT
None.
Agenda Page 8
Staff Report – Agenda Item 3
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Receive and File May 2024 Investment Report
Date: June 26, 2024
RECOMMENDATION
Receive and file.
ATTACHMENTS
1. May 2024 Investment Report
Agenda Page 9
Finance Committee Item 3
Agenda Page 10
Staff Report – Agenda Item 4
To: Finance Committee
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Receive and File April 2024 Financial Dashboard Date: June 26, 2024
RECOMMENDATION
Receive and file.
ATTACHMENT
1. April 2024 Financial Dashboard
Agenda Page 11
CUSTOMERS
Summary of Financial Results
Definitions:
Accounts: Active Accounts represents customer accounts of active customers served by CPA per Calpine Invoice.
Participation Rate %: Participation Rate represents active accounts divided by eligible CPA accounts YTD Sales Volume: Year-to-date sales volume represents the amount of energy (in gigawatt hours) sold to retail customers Revenues: Retail energy sales less allowance for doubtful accounts Cost of energy: Cost of energy includes direct costs incurred to serve CPA’s load Operating expenses: Operating expenditures include general, administrative, consulting, payroll, and other costs required to fund operations Net operating income represents the difference between revenues and expenditures before interest income and expense, and capital expenditures
Cash and Cash Equivalents: Includes bank accounts and marketable securities with maturities of less than 90 days.
Year to date (YTD): Represents the fiscal period beginning July 1, 2023 YTD
Apr
2024
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,041,285
Participation Rate
93.1%
YTD Sales Volume
8,892 GWh
Apr Volume
762 GWh
Agr/Oth Com-Lg
23%
Com-Sm
31%
Res
45%
In April 2024, CPA recorded an operating gain of $33 million, 10% or $3.8 million less than the budgeted operating gain of $36.8 million.
April 2024 revenues were $101.2 million or 8% lower than FY 2023/24 budget resulting largely from cooler than normal weather. The April cost of energy was $64.4 million or 5% lower than the FY 2023/24 budget. For the year-to-date CPA recorded operating income of $153.3 million, 24% or $47.7 million below budget of $200.9 million. CPA’s year to date financial results were negatively impacted by abnormal weather for much of the first half of the FY 2023/24 and an increase in the 2023 Market Price Benchmark promulgated by CPUC in early October 2023 which increased certain renewable energy costs. Operating costs were 24% below budget for the year to date due to lower than budgeted spending on general and administrative expenses, customer programs and other services, and the non-utilization of contingencies.
As of April 30th, 2024, CPA had unrestricted cash, cash equivalents, and investments of $406.7 million, and $159.853 million available in its bank line of credit representing 166 Days Liquidity on Hand.
CPA is financially sound and in compliance with its bank and other credit covenants.
Agenda Page 12
Staff Report – Agenda Item 5
To: Finance Committee
From: David McNeil, Chief Financial Officer
Subject: Report from the Chief Financial Officer
Date: June 26, 2024
The CFO will provide an oral update on CPA’s financial operations.
Agenda Page 13
Staff Report – Agenda Item 6
To: Finance Committee
From: Kate Freeman, Strategic Finance Manager
David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Proposed Clean Energy Prepayment Transactions
Date: June 26, 2024
RECOMMENDATION
A. Recommend that the Board approve up to three prepayment transactions with either Goldman Sachs (GS), Morgan Stanley (MS), or Royal Bank of Canada (RBC) as CPA's Underwriter & Prepaid Supplier, provided that Staff will be authorized to complete no more than three transactions in total; B. Recommend that the Board of Directors Approve the Delegation of Authority to Staff to Select Funding Recipient(s) for Prepayment Transactions Completed with GS and/or MS; If RBC is selected as CPA’s Underwriter & Prepaid Supplier, RBC will also Serve as the Funding Recipient for any Prepayment Transactions Completed with RBC.
ATTACHMENTS
1. Proposed Clean Energy Prepay Transactions Presentation Agenda Page 14
June 26, 2024
Proposed Clean Energy Prepayment
Transactions
Agenda Page 15
2 Recommendation
Recommend that the Board approve up to three prepayment transactions with either Goldman Sachs (GS), Morgan Stanley (MS), or Royal Bank of Canada (RBC) as CPA’s Underwriter & Prepaid Supplier, provided that Staff will be authorized to complete no more than three transactions in total
Recommend that the Board approve the delegation of authority to Staff to select Funding Recipient(s) for prepayment transactions completed with GS and/or MS. RBC will serve as the Funding Recipient for any prepayment transactions completed with RBC.
Agenda Page 16
3 Background
Prepays are well-established financing mechanisms, grounded in the US tax code, that allow municipal utilities and CCAs to leverage their status as issuers of tax-exempt debt to reduce energy costs
Since Fall 2021, eleven prepayment transactions totaling over $9.8 billion have been completed by CCAs through the California Community Choice Financing Authority (CCCFA)
CPA executed its first two prepay bond transactions with GS and its subsidiary J. Aron in February and June 2023. The transactions will reduce CPA's energy costs by approximately $98 million over an eight-year period.
In May 2024, the Board approved contracts with Municipal Capital Markets and Chapman & Cutler to support the preparation of 1-3 additional CPA prepay transactions. Staff subsequently executed Memoranda of Understanding (MOUs) and prepared contracts with three prospective Underwriter & Prepaid Suppliers.
Agenda Page 17
4 Proposed Approach for Prepays 3, 4 & 5
At the July 11th Board meeting, Staff plan to request the adoption of three Resolutions authorizing CPA to complete up to a total of three prepay transactions with any or all of the following Underwriters & Prepaid Suppliers:
GS & J. Aron
MS & Morgan Stanley Capital Group (MSCG)
RBC
In prior transactions, Staff sought authorization to transact with only one bank (GS). For prepays 3-5, Staff are seeking authorization to transact with any of three banks in order to:
Provide CPA with nimbleness to rapidly transact based on favorable market conditions Ensure that CPA receives best available pricing and terms from the most experienced and well-regarded Underwriters & Prepaid Suppliers in the market GS, MS, and RBC are the top three issuers of prepay bonds in the past five years, and are collectively responsible for >80% of all prepay issuances over the period As with CPA’s previous prepay transactions, Staff view the risks as acceptable In the event of an unsuccessful transaction, CPA’s liability is limited to the potential payment of a bond rating agency and green bond fees should an issuance fail to occur Opportunity costs – Staff time invested in prepay transactions could have been used in other areas Agenda Page 18
5 Proposed Approach for Prepays 3, 4 & 5
Staff will request authorization to complete
up to three prepay transactions of up to $1.5
billion, with a total amount across all
transactions not to exceed $4.5 billion
Staff estimate CPA’s assignable portfolio of
long-term PPAs achieving COD by 12/31/26
could support ~$4.5 billion in prepay
transactions depending on market conditions
The banks permit CPA to prepay its short-term
energy purchases, allowing us to price deals using
LT PPAs up to 2-3 years in advance of COD and
start receiving energy cost savings sooner
Three CCCFA prepay bond issuances have
exceeded $1 billion in size
Series 2021B (for EBCE/SVCE): $1.235B
Series 2023G (for MCE): $1.038B
Series 2024A (for SVCE): $1.102B
A $1.5 billion maximum size per bond gives
CPA flexibility to capitalize on favorable
market conditions
Est. Prepayment Par Amount ($B) of CPA
Long-Term PPAs by Online Date
Agenda Page 19
6 Summary of Proposed Board Action
The Board will be asked to adopt three Resolutions that encompass the following approvals or authorizations for each of the three Underwriters & Prepay Suppliers:
1. Define the parameters which must be satisfied in order to execute prepay transactions Bonds will be limited obligations of CCCFA, not obligations of CPA CPA will complete no more than three prepay transactions in total (across all prepaid suppliers) Aggregate bond principal of each prepay transaction will not exceed $1.5 billion The minimum "Monthly Discount Percentage" (i.e., cost savings) as determined at Initial Pricing Date will be 5%; the minimum Monthly Discount Percentage to be used for future Repricing Dates will be set at the highest level acceptable to Tax Counsel
CCCFA's total cost of issuance (TCOI) shall not exceed 1.25% of the amount of bond proceeds
2. Execution of proposed CPA documents or document forms (described on Slide 7)
3. Direction to CCCFA to make payments out of bond proceeds to service providers for activities required to issue the prepay bonds
These Resolutions will be substantially similar to those approved by the Board to support CPA's first two prepay transactions
Agenda Page 20
7 Summary of Prepaid Supplier Documents
Each of the three Resolutions would authorize the execution or approval of the following documents and document forms with each of GS, MS, and RBC:
1. Clean Energy Purchase Contract – Agreement between CPA and CCCFA to purchase assigned discounted electricity
2. Operational Services Agreement – Agreement between CPA and CCCFA permitting CPA to control various actions of CCCFA relating to project operations
3. Memorandum of Understanding with CCCFA – CPA agrees to indemnify CCCFA for rating agency and green bond opinion fees in the event the prepay bonds are not issued
4. Form of Limited Assignment Agreement – Form of agreement between CPA, PPA Sellers, and [Prepaid Supplier] governing the assignment of existing and future PPAs
5. Letter Agreement re: Limited Assignment Agreement1
– CPA and [Prepaid Supplier] agree to use
the Form of Limited Assignment Agreement for future PPA assignments
6. PPA Custodial Agreement – Provides for creation of a custody account for receipt of payments from [Prepaid Supplier] and CPA to settle monthly PPA Seller invoices
7. Appendix A of Preliminary Official Statement – Provides descriptive, operating, and financial information regarding CPA; used for marketing the Bonds (will be identical for all three Resolutions) 1 For RBC, the Letter Agreement re: LAA is included as Exhibit F of the Clean Energy Purchase Contract rather than as a separate document Agenda Page 21
8 Recommendation
Recommend that the Board approve up to three prepayment transactions with either Goldman Sachs (GS), Morgan Stanley (MS), or Royal Bank of Canada (RBC) as CPA’s Underwriter & Prepaid Supplier, provided that Staff will be authorized to complete no more than three transactions in total
Recommend that the Board approve the delegation of authority to Staff to select Funding Recipient(s) for prepayment transactions completed with GS and/or MS. RBC will serve as the Funding Recipient for any prepayment transactions completed with RBC.
Agenda Page 22
Appendix
Agenda Page 23
Prepay LLC
4 5
6 10
Initial Issuance and Cash Flows
1. Debt Issuance – CCCFA issues the prepay bonds
2. Prepayment – CCCFA remits net bond proceeds to [Prepay LLC] in return for 30 years of assigned electricity deliveries
3. Unsecured Loan – [Prepay LLC] loans net bond proceeds to [Prepaid Supplier Parent Bank] or another Funding
Recipient. The Funding Recipient makes fixed monthly
payments to [Prepay LLC] equal to expected assigned
electricity multiplied by the PPA price of an assigned
energy project
Monthly Cash / Energy Flows
4. Assigned PPAs – CPA assigns certain rights and obligations as a Buyer on existing PPAs to [Prepaid Supplier]; [Prepaid Supplier] makes monthly payments to PPA Sellers for
assigned delivered energy
5. Electricity Supply – [Prepay LLC] enters into a long-term agreement to purchase electricity from J. Aron to match assigned electricity quantities/terms
6. Project Participant – CCCFA sells CPA all assigned electricity delivered by [Prepay LLC] at the discounted prepay price [Prepay LLC]/CPA is able to solicit bids
from third-party Funding Recipients and
may select a non-[Parent Bank] party if
they offer greater savings to CPA
Funding Recipient
(Prepaid Supplier Parent
Bank or 3rd party)
Project
Participant
(CPA)
Prepaid
Supplier The Bonds
Issuer
(CCCFA)
Prepayment Transaction Diagram (with SPV)
Agenda Page 24
11 CPA prepay transaction will involve the sale of tax-exempt bonds to bond holders by CCCFA(1) CCCFA remits the net bond proceeds to a special purpose entity, [Prepay LLC], in return for a 30-year supply of electricity pursuant to the Master Power Supply Agreement (MPSA) The creation of [Prepay LLC] provides transparency and market level savings for the initial period of the prepay (5-10 years) as well as at each subsequent interest rate reset which is estimated to occur each 5-10 years over the bond term. Without [Prepay LLC], prepay transaction terminates if [Prepaid Supplier Parent Bank] (Parent Bank) cannot offer minimum savings at reset. [Prepay LLC] lends the net bond proceeds to [Parent Bank] under an unsecured term loan agreement (the Funding Agreement). [Parent Bank] makes monthly payments to [Prepay LLC] sufficient to allow it to meet its payment obligations under the Electricity Purchase Sale & Service Agreement (EPSSA; see below). [Parent Bank] issues a guaranty to back obligations of [Prepay LLC] under the MPSA(2).
[Prepaid Supplier] and [Prepay LLC] enter into the EPSSA under which [Prepay LLC] purchases electricity + related products from [Prepaid Supplier] for delivery to CCCFA. [Prepaid Supplier] equitizes [Prepay LLC] through the Subordinated Term Loan Agreement. (1)CPA does not issue the bonds. Bond proceeds do not flow to CPA or to renewable energy project developers/owners. CPA has no obligation to repay the bonds.
(2)The bonds carry the credit rating of [Parent Bank] or selected 3rd Party Transaction Summary – Prepay Bond Issuance (with SPV)
Agenda Page 25
12 CPA assigns certain rights and obligations under its existing PPAs to [Prepaid Supplier] via LAAs Under the LAAs, PPA Sellers will deliver assigned renewable energy to [Prepaid Supplier] and [Prepaid Supplier] assumes the obligation to pay the PPA Sellers for the assigned energy Title to the renewable energy passes instantaneously from PPA Seller to [Prepaid Supplier] to [Prepay LLC] to CCCFA to CPA at the energy delivery point CPA retains other rights and unassigned payment obligations under the PPAs CPA and CCCFA enter the Clean Energy Purchase Contract (CEPC) under which CPA purchases assigned electricity + related products from CCCFA at a discounted price. This is the source of CPA’s savings.
CCCFA uses CPA’s payments to service debt owed to bond holders.
CPA is responsible for assigning sufficient electricity into the prepay transaction via the LAAs If an LAA terminates or expires, CPA will designate another PPA Seller for the term of the CEPC PPA Sellers continue to provide a single monthly invoice for energy and related costs. Monthly payment obligations to PPA Sellers are split between CPA and [Prepaid Supplier] as follows:
[Prepaid Supplier] sells assigned energy to [Prepay LLC] under the EPSSA, [Prepay LLC] sells energy to CCCFA under the MPSA, and CCCFA sells energy to CPA under the CEPC [Prepaid Supplier] pays the PPA Seller for assigned energy at the PPA price. CPA pays the PPA Seller for any unassigned obligations under the PPA.
Settlement of payments are set forth in the PPA Custodial Agreement.
Transaction Summary – PPA Assignments and Settlement
Agenda Page 26
13 California Community Choice Financing Authority (CCCFA) (Bond Issuer) Issues bond; uses bond proceeds to pay [Prepay LLC] in exchange for a 30-year supply of energy Delivers energy to CPA in exchange for prepay energy payments under the CEPC Pays Bond Investors
[Parent Bank] or selected 3rd Party (Funding Recipient) Receives term loan from [Prepay LLC] for amount of bond proceeds Makes monthly payments to [Prepay LLC] allowing it to meet obligations to [Prepaid Supplier] under the EPSSA [Prepaid Supplier] / [Prepay LLC] (Prepaid Supplier)
CPA assigns one or more existing PPAs to [Prepaid Supplier], which assumes the PPA obligations of the “buyer” [Prepaid Supplier] delivers energy to [Prepay LLC] under the EPSSA; [Prepay LLC] delivers energy to CCCFA under the MPSA
[Prepaid Supplier] makes monthly payments to PPA Seller via Custodial Account for assigned energy CPA (Project Participant / Purchaser)
Makes fixed monthly payments to CCCFA / Bond Trustee for prepaid energy Makes monthly payments to PPA Seller via Custodial Account for non-prepaid energy, unassigned obligations PPA Sellers
Receive monthly cash flows from Custodial Account for energy assigned to [Prepaid Supplier] + non-prepaid energy and unassigned obligations
Service Providers
Municipal Financial Advisor, Bond and Tax Counsel, CPA Prepay Legal Counsel, Prepay Bond Underwriters Support the structuring and issuance of a prepay Bond
Prepayment Transaction – Entities (with SPV)
Agenda Page 27
14 California Community Choice Financing Authority (CCCFA) issued $998,780,000 of bonds on February 15, 2023. The bonds were issued at an average yield of 4.60%. The bonds received a “Green Bonds” designation from Kestrel Verifiers and were rated Baa1 by Moody’s.
Bonds were oversubscribed by 1.6x, attracting 34 bidders. Roughly 2/3 of bids came from major bonds and mutual funds. CPA’s name was known and well-regarded among investors.
CPA has assigned three PPAs into the prepay:
Geysers geothermal (50 MW)
Arlington solar + storage (233 MW / 132 MW)
Resurgence solar + storage (48 MW / 40 MW)
During the initial eight-year period of the bonds, CPA will recognize energy cost savings of $66.5 million, or roughly $7.8 million annually CPA Prepay 1 – Transaction Summary
Agenda Page 28
15 California Community Choice Financing Authority (CCCFA) issued $958,290,000 of bonds on June 7, 2023. The bonds were issued at an average yield of 4.62%. The bonds received a “Green Bonds” designation from Kestrel Verifiers and were rated A2 by Moody’s.
Bonds were undersubscribed by 0.93x, attracting 22 bidders. Nearly all of bids came from major bonds and mutual funds, with the top 10 investors accounting for ~88% of bids. CPA’s name was known and well-regarded among investors.
CPA has assigned four PPAs into the prepay:
White Hills / Mohave wind (300 MW)
Daggett 2 solar + storage (65 MW / 52 MW)
Daggett 3 solar + storage (123 MW / 61.5 MW)
Estrella solar + storage (56 MW / 28 MW)
During the initial five-year period of the bonds, CPA will recognize energy cost savings of $32.4 million, or roughly $6.5 million annually CPA Prepay 2 – Transaction Summary
Agenda Page 29