Finance & Risk
Management
Committee
Meeting
October 17, 2024
Welcome
&
Call to
Order
Roll
Call
4 Items to
be Added,
Withdrawn
or
Reordered
on the
Agenda
Public
Comment
for Items
not
on the
Agenda
Consent
Calendar
1. Approval of September 19, 2024,
Meeting Minutes
Public
Comment on
Consent
Calendar
Regular
Agenda
2. Fiscal Year End 2023-24 Financial Audit Progress
Report Presentation
3. Review of Treasurer’s Report for Period Ending July
31, 2024
4. Recommend Board Approval of Resolution No. 2024-
08, authorizing execution of an Energy Prepayment
Transaction and related documents and ‘form of’
documents subject to maximum issuance amount and
minimum savings parameters
5. Recommend Board Approval of Amendment to the
Revolving Credit Agreement with JP Morgan to
Increase the Credit Facility from $150,000,000 to
$250,000,000
10 Item No. 2
Fiscal Year End 2023-24 Financial Audit
Progress Report Presentation
Recommendation: Receive and File Fiscal Year
End 2023-24 Financial Audit Progress Report
Presentation.
Presenter:
Dr. Eric Washington,
Chief Financial Officer
San Diego Community Power
Report to Finance and Risk Management
Committee
October 17, 2024
Introduction
• Brett Bradford, CPA
• Audit Partner
• 21 years in public accounting and performing audits of government entities
• Currently working with several CCA’s throughout California • Aliandra Schaffer
• Supervisor
• 5 years in public accounting and performing audits of governments (CCA’s)
Results of current year audit:
• The 2024 audit is near completion. We plan on reporting the following:
• Unmodified opinion – Based on our audit, the financial statements are materially accurate.
• No significant deficiencies or material weakness in
internal control noted.
Audits of the years ended June 30, 2024 and 2023
Financial Statements:
Relative Roles & Responsibilities
• Management is responsible for preparing the Financial Statements and establishing a system of internal control.
• Auditor is responsible for auditing the Financial Statements • Considering risks of material misstatement in the Financial Statements
• Considering internal controls relevant to the Financial Statements • Performing tests of year-end balances based on risk assessment • Evaluating adequacy of disclosures
Risk Assessment for the years ended
June 30, 2024 and 2023
Significant areas of focus
• Revenue recognition
• Accounts receivable and accrued revenue
• Test a sample of customer billings
• Relate total cash received during the year to revenue • Look at cash received subsequent to year-end and relate to A/R • Review revenue recognition through year-end and method for determining (accrued revenue)
• Cash and securities
• Confirmations sent to financial institutions
Risk Assessment for the years ended
June 30, 2024 and 2023
Significant areas of focus
• Accrued Cost of Electricity
• Review subsequent bills from electricity providers and cash payments • Financial Statement Note Disclosures – Complete and without bias Required Board Communications
• There were no new material
accounting policies adopted by
San Diego Community Power
throughout the period audited.
• No alternative treatments of
accounting principles for material
items in the financial statements
have been discussed with
management.
Required Board Communications
(continued)
• We have not identified any
significant or unusual
transactions or applications of
accounting principles where a
lack of authoritative guidance
exists.
• We are not expecting to propose any
adjustments to the financial
statements.
• There have been no disagreements with management concerning the scope of our audit, the application of accounting principles, or the basis for management’s judgments on any significant matters.
• We have not encountered any difficulties in dealing with management during the performance of our audit.
Required Board Communications
(continued)
Brett Bradford: 707-577-1582
Aliandra Schaffer: 707-577-1535
Questions?
Public
Comment for
Item No. 2
22 Item No. 3
Review of Treasurer’s Report for Period Ending
July 31, 2024
Recommendation: Receive and File Treasurer’s
Report for Period Ending July 31, 2024
Presenter:
Dr. Eric Washington,
Chief Financial Officer
23 Results for the period were positive overall
compared to the adopted budget:
• Net operating revenues 15.0 percentage
points over budget.
• Operating expenses came in 9.0
percentage points over budget
Financial results for the YTD FY25:
• $167M in net operating revenues
• $120M in total expenses (includes energy
costs of $103.3M or 86% of net
revenues)
• $46.4M change in YTD net position
Item 1: Treasurer’s Report
YTD FY25 Budget v. Actual
Budget Comparison
YTD FY25 as
of 07/31/24 (1
month)
FY25 YTD Budget Budget Variance ($) Budget (%)
Net Operating Revenues $167,360,408 $145,579,846 $21,780,562 115% Total Expenses $120,864,755 $111,096,293 $9,768,462 109% Change in Net Position $46,495,653 $34,483,553 $12,012,100 35% $-
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
Net Operating Revenues Total Expenses Change in Net Position YTD FY25 Results v. Budget
YTD FY25 as of 07/31/24 (1 month) FY25 YTD Budget
24 $46M
Reserve
Contribution
FY 2024-25 YTD $M $50M $100M $150M $200M
Item 1: Treasurer’s Report
$408M
Total Liquidity
FY 2024-25 YTD
$0M
Outstanding
Debt
FY 2024-25 YTD
56%
Percent Reserve
Goal Met
FY 2024-25
CONTRIBUTION RESERVES
GOAL DEBT
Reserve contribution
for the fiscal year
Outstanding loans
FY25 YTD
Total available liquidity
FY25 YTD
$556M 180-DCOH
Reserve Target FY25
$M $20M $40M $60M
LOC $0
M
$M $200M $400M $600M
$296M
Cash
$113
LOC
Cash
56%
Unmet
Reserves
43%
FYTD
FYTD
$46M Actual
$34M Budget
25 Item 1: Treasurer’s Report
102
Days
Cash on Hand
140
Days
Cash on Hand with
Total Liquidity
26 Item 1: Treasurer’s Report
Public
Comment for
Item No. 3
28 Item No. 4
Board Approval of Resolution No. 2024-08, authorizing execution of an Energy Prepayment Transaction and related documents and ‘form of’ documents subject to maximum issuance amount and minimum savings parameters
Recommendation: Recommend Board Approval to Adopt Resolution No. 2024-08 approving parameters under which an energy prepayment transaction can be completed; authorizing and/or approving documents or “form of” documents supporting the prepay transaction; and directing California Community Choice Financing Authority (CCCFA) to make payments to service providers for issuance costs from prepay bond proceeds.
Presenter:
Dr. Eric Washington,
Chief Financial Officer
29 Prepayment Transaction Overview
• Goal – Reduce cost of power purchases by 8% or more
• How – Leverage use of tax-exempt bonding capacity to secure long-term supply • Background
• Codified in the U.S. tax law
• Used since the 1990s largely for natural gas transactions • Over 100 transactions totaling over $75 billion completed in the U.S. – mostly for gas • Twelve energy prepayment transactions totaling $11.3 billion completed over the last few years for six California Community Choice Aggregators:
Ava Community Energy Pioneer Community Energy
Silicon Valley Clean Energy Clean Power Alliance
Marin Clean Energy Central Coast Community Energy
30 Prepayments That Have Been Completed by
Public Utilities in California
Date Amt. ($000) Issuer Description Beneficiary
06/2006 230,845 Vernon Nat. Gas Fin Auth Nat Gas City of Vernon Elec 01/2007 209,350 Roseville Natural Gas Fin Auth Nat. Gas City of Roseville Elec 05/2007 757,055 Northern Ca Gas Auth No. 1 Nat. Gas SMUD 09/2007 887,360 Long Beach Bond Fin Auth Nat. Gas City of Long Beach 10/2007 504,445 So. Ca. Pub. Power Auth Nat. Gas Multiple MOUs 10/2007 251,695 Long Beach Bond Fin. Auth Nat. Gas City of Long Beach 08/2009 901,620 M-S-R Energy Authority Nat. Gas MID/Redding/SVP 10/2009 514,160 So. Ca Pub Power Auth (Windy Flats) Elec (Wind) LADWP, Mult. MOUs 04/2010 778,665 Cal. Statewide Comm Dev Auth Nat. Gas SMUD 2010/11 394,700 So. Ca Pub Power Auth (Milford 1 & 2) Elec (Wind) LADWP, Mult. MOUs 12/2018 539,615 Northern Ca Energy Auth Gas/Elec SMUD
5/2024 592,270 So. Ca Pub Power Auth (Energy Prepay) Elec Anaheim Total $6,561,780
SCPPA/APU transaction in May saved over 15% on old/expensive PPAs 31 Prepayments That Have Been Completed by
CCAs in California
All transactions to date have achieved @9.5% savings or better.
Most recent transactions have been over 12%
Date Amt. ($000) Issuer Description Beneficiary
09/2021 1,234,720 California Community Choice Fin Auth Elec (Green) SVCE, EBCE 11/2021 602,655 California Community Choice Fin Auth Elec (Green) MCE 06/2022 931,120 California Community Choice Fin Auth Elec (Green) EBCE 12/2022 459,640 California Community Choice Fin Auth Elec (Green) Pioneer 01/2023 841,550 California Community Choice Fin Auth Elec (Green) SVCE 02/2023 998,780 California Community Choice Fin Auth Elec (Green) CPA 06/2023 958,290 California Community Choice Fin Auth Elec (Green) CPA 08/2023 997,895 California Community Choice Fin Auth Elec (Green) EBCE 10/2023 647,750 California Community Choice Fin Auth Elec (Green) CCCE 12/2023 1,038,285 California Community Choice Fin Auth Elec (Green) MCE 01/2024 1,101,625 California Community Choice Fin Auth Elec (Green) SVCE 08/2024 1,524,180 California Community Choice Fin Auth Elec (Green) CPA 9/2024 California Community Choice Fin Auth Elec (Green) PCE 9/2024 California Community Choice Fin Auth Elec (Green) CPA Total
32 Entities Involved in a Prepayment
Transaction
• SD Community Power – Has existing Power Purchase Agreement(s) for clean energy • Prepay Counterparty – Typically a financial institution with a commodity presence or a financial institution partnered with a commodity market participant • Issuer – Bond issuing entity formed for sole purpose of selling the prepayment bonds, typically a Joint Powers Authority (“JPA”). All other CCAs have used California Community Choice Financing Authority (CCCFA)
• Existing Power Supply Counterparty – Agrees to limited assignment of the existing PPA • Bond Investors – Purchase the non-recourse tax-exempt prepayment bonds • Service Providers - Municipal financial advisor, bond, tax and disclosure counsel, to support the structuring and issuance of a prepayment transaction. 33 Prepayment Timeline
Nov 7, 2023: Request-for-Proposal (RFP) was issued for Municipal Financial Advisor (MFA) Dec 28, 2023: PFM Financial Advisors LLC (PFM) was selected as MFA Feb 15, 2024: Finance and Risk Management Committee (FRMC) Prepaid Financing Presentation Feb 22, 2024: Board Presentation Prepaid Financing Presentation Apr 19, 2024: RFP issued for underwriter and legal services (bond, tax, disclosure) Aug 22, 2024: Legal counsel agreement with Chapman & Cutler for disclosure services – Potential Board approved
Sep 19, 2024: FRMC – Presentation and potential recommendation for Board approval of Resolution for Bond Issuer
Sep 26, 2024: Board – Presentation and potential approval of Resolution for Bond Issuer Oct 11, 2023: Bond Issuer admits SDCP Associate Member
Oct 17, 20224: FRMC – Presentation and potential recommendation for Board approval on Resolution to authorize transaction subject to parameters Oct 24, 2024: Board – Presentation and potential recommendation for Board approval on Resolution to authorize transaction subject to parameters Nov 7, 2024: Execute prepaid agreement
Nov 19, 2024: Closing
Public
Comment for
Item No. 4
35 Item No. 5
Recommend Board Approval of Amendment to the
Revolving Credit Agreement with JP Morgan to
Increase the Credit Facility from $150,000,000 to
$250,000,000
Recommendation: Recommend SDCP Board of Directors approval to authorize the Chief Financial Officer or Chief Executive Officer to execute an amendment to the revolving credit agreement and related documents necessary to implement an increase to the existing line of credit from $150,000,000 to $250,000,000 from a JP Morgan credit facility Presenter:
Dr. Eric Washington,
Chief Financial Officer
36 Amend J.P. Morgan Credit Agreement for
$250M
Recommendation: Authorize the CFO or CEO to amend the credit agreement with JP Morgan and related documents necessary to increase the line credit from $150 million to $250 million.
Prior Line of Credit
$150.0m
New Line of Credit
$250.0m
Loan Type • Commercial Revolving Line of Credit (“RLOC”) Purpose • To support energy procurement costs
• To support working capital as needed
• To support the issuance Letters of Credit
Key Changes • Increase the amount of the funding commitment in the Credit Agreement from $150,000,000 to $250,000,000
• Reduce the LC Facility Fee from 1.10% to 1.05%
Public
Comment for
Item No. 5
Committee Member
Announcements
Adjournment
Next Regular
Finance & Risk
Management
Committee
Meeting
November 14, 2024