Valley Clean Energy Board Meeting – Thursday, February 13, 2025 Item 15 – CCCFA Prepay
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Public Comments
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Join the Public Comment Queue by
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© PFM 3
Executing a Valley Clean Energy Prepay
Transaction
PFM Financial Advisors LLC 1150 S. Olive Street,
10th Floor
Los Angeles, CA 90015
213.489.4075
February 2025
© PFM 4
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 18 energy prepayment transactions totaling $17.8 billion completed last few years for 10 California Community Choice Aggregators:
Prepayment Transaction
➢ Ava Community Energy (AVA) ➢ Pioneer Community Energy (Pioneer) ➢ Silicon Valley Clean Energy (SVCE) ➢ Clean Power Alliance (CPA) ➢ Marin Clean Energy (MCE) ➢ Central Coast Community Energy (3CE) ➢ San Jose Clean Energy (SJCE) ➢ Peninsula Clean Energy (PCE) ➢ Sonoma Clean Power (SCP) ➢ San Diego Community Power (SDCP) © PFM 5
Prepayments That Have Been Completed by CCAs in California Date Amt. ($000) Issuer Description Beneficiary Prepay Counterparty 09/2021 1,234,720 California Community Choice Financing Authority Elec (Green) SVCE, AVA Morgan Stanley 11/2021 602,655 California Community Choice Financing Authority Elec (Green) MCE Goldman Sachs 07/2022 931,120 California Community Choice Financing Authority Elec (Green) AVA Morgan Stanley 01/2023 459,640 California Community Choice Financing Authority Elec (Green) Pioneer Goldman Sachs 01/2023 841,550 California Community Choice Financing Authority Elec (Green) SVCE Morgan Stanley 02/2023 998,780 California Community Choice Financing Authority Elec (Green) CPA Goldman Sachs 06/2023 958,290 California Community Choice Financing Authority Elec (Green) CPA Goldman Sachs 08/2023 997,895 California Community Choice Financing Authority Elec (Green) AVA Morgan Stanley 10/2023 647,750 California Community Choice Financing Authority Elec (Green) 3CE Goldman Sachs 12/2023 1,038,285 California Community Choice Financing Authority Elec (Green) MCE Goldman Sachs 01/2024 1,101,625 California Community Choice Financing Authority Elec (Green) SVCE Morgan Stanley 08/2024 1,524,180 California Community Choice Financing Authority Elec (Green) CPA Goldman Sachs 10/2024 959,825 California Community Choice Financing Authority Elec (Green) PCE Goldman Sachs 11/2024 1,243,210 California Community Choice Financing Authority Elec (Green) SJCE Morgan Stanley 11/2024 1,152,995 California Community Choice Financing Authority Elec (Green) CPA RBC Capital Markets 11/2024 1,000,500 California Community Choice Financing Authority Elec (Green) SDCP Morgan Stanley 11/2024 775,590 California Community Choice Financing Authority Elec (Green) SCP Goldman Sachs 12/2024 1,290,750 California Community Choice Financing Authority Elec (Green) CPA Goldman Sachs Total $17,759,360
All transactions to date have achieved @ 9.5% savings or better.
Most recent transactions have been over 12%.
Prepayment Transaction
© PFM 6
Pre-Pay Deal Team
Prepayment Transaction
Valley Clean Energy
Municipal Advisor Prepay Counsel Conduit Issuer Prepaid Supplier Custodian/Trustee Rating Agency Bond/Tax Counsel
• Financial advisory
• Advice on structure,
timing, and terms
• Fiduciary
responsibility to
CCA
• PFM*
• Legal advisory
• Represents CCA’s
interests
• Orrick*
• Issuer of tax-exempt bonds
• CCCFA
• Structures
transaction
• Markets and
underwrites bonds
• Goldman Sachs/J.
Aron*
• Manages prepay
estate
• Bond interest
payments
• US Bank*
• Rates bonds
• Moody’s
• Legal services
• Affirms tax-exempt
bond status and
validity of bond
offering
• Orrick*
Entities Selected by
VCE
Other Entities in
Prepay Deal
Green Font = firms hired for the prepay transaction
*Fees paid on contingency from bond proceeds
© PFM 7
1) VCE partially assigns PPAs to
Goldman Sachs/J. Aron
2) VCE and CCCFA execute a
Clean Energy Purchase Contract
3) Goldman Sachs/J. Aron delivers
power to CCCFA via a Master
Power Supply Agreement
4) CCCFA delivers power to VCE
5) CCCFA issues non-recourse tax-exempt bonds
6) CCCFA makes a prepayment to
Goldman Sachs/J. Aron for a 30-
year power supply
7) VCE makes payments to the
CCCFA net of savings
8) CCFCA makes debt payments
with payments from VCE
Summary of Energy Prepayment Structure Mechanics
Prepayment Transaction
PPA to be
“Partially
Assigned”
1 Non-Recourse
Tax-exempt
Debt Debt
Service
Bond
Proceeds
VCE
Goldman
Sachs/
J. Aron
MWhs
Prepayment $$$
PPA Price
less Discount
MWhs
CCCFA
Clean
Energy
Purchase
Contract
2 3
4 5
6 7
8 © PFM 8
PPA Seller
◼ VCE enters into a PPA with
PPA Seller
◼ PPA Seller delivers as generated
power and attributes
◼ VCE pays monthly for as-generated
power and attributes
Power +
Attributes
Contract Price
PPA Seller
Prepaid Supplier
(Goldman Sachs/J.
Aron)
Status Quo
Power +
Attributes
◼ Structures remains the same, but instead
of facing VCE, the PPA Seller faces the
Prepaid Supplier
◼ If the Prepaid Supplier fails to pay, VCE
guarantees payments (which it is able to
recoup from the Prepay Trust Estate)
◼ Under certain scenarios,
assignment can be terminated,
and PPA Seller goes back to
facing VCE
◼ The existing Scheduling Coordinator
will remain the Scheduling
Coordinator; only change is that the
Prepaid Supplier is copied on bills
Contract Price Contract Price
In event the Prepaid Supplier fails to
perform, VCE guarantees payment
Power +
Attributes
Post-Transaction
PPA Assignment
Prepayment Transaction
© PFM 9
Favorable Risk Allocation – “Take-and-Pay” Structure
Counterparty default on energy delivery
VCE receives too much energy and is unable
to have Qualified Use and/or has to meet new
renewable mandates in the future
Debt obligation could obligate VCE over long-term
Rating agency treatment of prepay debt
Debt is non-recourse to VCE, and VCE’s obligation
is take and pay. Rating agencies do not count
prepay transactions as debt or fixed costs of VCE
Counterparty will remarket the energy to qualified
entities to ensure VCE compliance with Qualified
Use
VCE only pays for energy if/when Counterparty
delivers the energy
Counterparty assumes debt obligations in the
event of Supplier default
Risk Mitigation
Commodity swap or guaranteed investment
contract (GIC) provider counterparty fails to
perform
Documents allow for replacement of swap and
GIC provider; Supplier is likely GIC provider (thus
no additional risk)
Supplier/Guarantor bears the risk of the
counterparty’s performance, and in the event of
default, the swap “tears up”
Prepayment Transaction
Key Risk – Transaction terminates and VCE no longer receives expected savings © PFM 10
Summary of Deal Documents
Document Description Parties (incl. VCE)
Clean Energy
Purchase
Contract
30-year agreement under which VCE will purchase discounted electricity from CCCFA
• CCCFA
Form of Limited
Assignment
Agreement (LAA)
Governs the assignment of electricity and green attributes from selected PPAs; initial set of LAAs to be finalized prior to pricing • PPA Sellers
• Goldman Sachs/ J.
Aron
Letter Agreement
to LAA
Agreement on management of PPA portfolio assigned into Prepay • Goldman Sachs/ J.
Aron
PPA Custodial
Agreement
Creates a custody account at US Bank for receipt of payments from VCE and Goldman to settle monthly invoices
• CCCFA
• Goldman Sachs/ J.
Aron
• US Bank
LLC Agreement VCE representative to be one of three directors of LLC setup specifically for Prepay
• Goldman Sachs/ J.
Aron
• Independent Director
Operational
Services
Agreement
Permits VCE to control various actions of CCCFA relating to Prepay project operations
• CCCFA
MOU with CCCFA VCE responsible for rating agency and Green Bonds verification fees (paid from bond proceeds at closing)
• CCCFA
Preliminary
Official Statement
Public offering document for tax-exempt bonds issued by CCCFA which describes VCE’s organization and operations
Prepayment Transaction
© PFM 11
Benefits and Rational
1) Source of cost savings that can lower customer rates Four PPAs assigned; structure and economics could change depending on the outcome of ongoing Limited Assignment Agreement negotiations
~379,752 MWh assigned, representing ~55% of VCE’s load in 2025 Represents ~$24.9 million of annual prepaid cash flows (i.e., energy procurement costs) Annual savings of ~$2-3 million, depending on market conditions, or ~8-12% of assigned energy procurement costs
2) Service provider fees paid from bond proceeds on a contingency basis • Only sunk costs are staff time, CCCFA membership fee, and rating agency fee 3) VCE not responsible for bond repayment and debt is non-recourse to VCE Prepayment Transaction
© PFM 12
Recommendation
Approval to complete a Prepay transaction subject to market conditions and minimum savings
• Minimum savings threshold of 8%, which represents annual savings of ~$2 million based on the current deal structure
Authorization to execute the following documentation:
• Clean Energy Purchase Contract with CCCFA
• Form of Limited Assignment Agreement (LAA)
• Letter Agreement regarding LAAs
• PPA Custodial Agreement
• Operational Services Agreement
• MOU with CCCFA
• Approval of Appendix A of the Preliminary Official Statement Prepayment Transaction
© PFM 13
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Valley Clean Energy Board Meeting – Thursday, February 13, 2025 Item 16 – 2024 Year-end Review
Public Comments
To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
OR
➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
Emailed comments received after the item has concluded but before the end of the meeting will not be read but will be included in the meeting record.
15 2024 Year
in Review:
Impact
Item 16 – 2024 Year-end Review
New Programs Launched
Lower Rates, New Tagline
A Growing Team
16 Projected to increase to $8.25M savings by the end of 2025 2024 Year
-
end Review:
Power
Portfolio
Item 16 – 2024 Year-end Review
Photo: YvonneHunterPhotography.com 17
Photo: YvonneHunterPhotography.com
Item 16 – 2024 Year-end Review
18 PV online now, BESS
anticipated Q1 2025
Anticipated Q2 2026
Anticipated Q2 2028
Anticipated Q2 2027
Anticipated Q4 2027
Anticipated Q2 2026
Ormat Geothermal Portfolio
Geothermal, Salton Sea
VCE Share 4.63MW
Item 16 – 2024 Year-end Review
Willy 9 Chap 2. Formerly Willow Springs Solar Project1. PV portion is complete and is in commercial operation. BESS is awaiting final approvals.
• Project size: 72MW PV + 36MW BESS
• PV delivering energy as of Jan 2024
• BESS anticipated online Q1 2025
1) Note: CAISO requested revised naming convention 19 .
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)]
20 Item 16 – 2024 Year-end Review
Note: 2025 Contracted RE pre REC sale: 78%; 2025 Contracted RE post REC sale: 72% Contracted RE 13% 18% 56% 84% 72% 87% 90% 90% 90% 90%
Anticipated RE 93% 95% 97% 100%
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)]
21 Item 16 – 2024 Year-end Review
12.60%
17.50%
lbs/CO2e/MWh
Note: 2021-2023 are the actual power content label (“PCL”) values. 2024 is a projection.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)]
22 Item 16 – 2024 Year-end Review: Slice of Day
(SOD)
Photo: YvonneHunterPhotography.com
2024 Year-end Review:
Marketing
& Outreach
Item 16 – 2024 Year-end Review
Photo: YvonneHunterPhotography.com 23
Events: 9 events; 40,000+ people reached
(including media, in-person)
Media: 4 press releases, 7 press placements, 1
media event, 200 + media contacts
Customer inquiries: rapid, tailored responses
with emphasis on authenticity and engagement
Outreach: Meeting Our Customers Where They Are
Item 16 – 2024 Year-end Review
Photos:
YvonneHunterPhotography.com
24 2024 Year
-
end Review:
Customer
Care
Item 16 – 2024 Year-end Review
Photo: YvonneHunterPhotography.com 25
Item 16 – 2024 Year-end Review
26 Customer Service Representative (CSR) Interactions
Year End Review Item 16 – 2024 Year-end Review
27 Opt-outs & Opt-ups, 2024
Year End Review Item 16 – 2024 Year-end Review
28 Monthly Interaction Type
Item 16 – 2024 Year-end Review
Average Time Spent on Websites
Across Industries: 53 seconds
(VCE: 1 minute 23 seconds)
E-Commerce Pages:
31 seconds-1
minute 43 seconds
Blogs/Press
Releases: 2 minutes
VCE Home
29 Website Analytics: Page Views & Engagement
2024 Year
-
end Review:
Programs
Item 16 – 2024 Year-end Review
Photo: YvonneHunterPhotography.com 30
Item 16 – 2024 Year-end Review
AgFIT - CONCLUDED
Ag and Solar photos:
YvonneHunterPhotography.com
31 Program Highlights
Hourly Flex Pricing -
LAUNCHED
REACT - LAUNCHED
Electric Advisor -
LAUNCHED
Continued
Item 16 – 2024 Year-end Review
32 Program Spotlight: Electric Advisor
32 Item 16 – 2024 Year-end Review
33 Program Spotlight: Electric Advisor
33 Photo: YvonneHunterPhotography.com
2024 Year-
end Review:
Finance
Item 16 – 2024 Year-end Review
34 Item 16 – 2024 Year-end Review
● 2024 Customer Savings
o 2.5% “Stackable” CARE/FERA Discount - $350K to (low-income) o 1%/2% Standard Green and UltraGreen Discount - $1.4M in Savings (Includes CARE/FERA)
o $50K in Percentage of Income Payment Plan (PIPP)
o NEM $0.01/kWh adder - $600K in incentives
● 2025 Customer Savings
o 10% “Stackable” CARE/FERA Discount - $750K to (low-income) o 5% Standard and UltraGreen Discount - $5M in Savings (Includes
CARE/FERA)
o PIPP & NEM discounts incentives unchanged
35 Finance Highlights
Item 16 – 2024 Year-end Review
● Adoption of Updated Reserve Policy (2025)
o Minimum 120+ Days Cash for Operating Reserve
o Minimum 60+ Days Cash for Rate Stabilization Reserve
● PPA Prepay Transaction – Q1 2025 ~2-3M in Annual Savings ● Investment Grade Credit Rating – Q2 2025 $250K in annual savings ● 2023 Clean Financial Audited Financials
● Reached $4M for Programs Contribution - $1M allocated in 2024. ● Compliance with All Debt (Line of Credit) and Power Purchase covenants ● Implemented 3rd Customer Rate Option – Base Green
36 Finance Highlights
Valley Clean Energy Board Meeting – Thursday, February 13, 2025 Item 17 – VCE Strategic Major Update Process
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Public Comments
38 To Provide Public Comment on any agenda item please:
➢ E-mail 300 words or less to: [email protected] OR
Join the Public Comment Queue by
➢ “Raising Hand” on Zoom Meeting
OR
➢ Press *9 if joining by phone
Emailed comments received before the item has concluded will be read into the record.
Emailed comments received after the item has concluded but before the end of the meeting will not be read but will be included in the meeting record.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 39 Item 17 – VCE Strategic Major Update Process
Overview
Introduce VCE’s Strategic Plan Major Update process and 2025 schedule.
This presentation will provide:
• Strategic Plan (Recap)
• Strategic Plan Guidelines Overview
• Major Update Timeline
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 40 Item 17 – VCE Strategic Major Update Process: Background Goal: Maintain and grow a strong financial foundation and manage costs to achieve long-term organizational health. FINANCIAL STRENGTH Goal: Manage power supply resources to consistently exceed California’s Renewable Portfolio Standard (RPS) while working toward a resource portfolio that is 100% carbon neutral by 2030.
PROCUREMENT & POWER SUPPLY
Goal: Prioritize VCE’s community benefits and increase customer satisfaction and retention. CUSTOMERS & COMMUNITY
Goal: Promote and deploy local decarbonization and grid innovation programs to improve grid stability, reliability, community energy resilience, and safety.
DECARBONIZATION &
GRID INNOVATION
Goal: Strongly advocate for public policies that support VCE’s Vision/Mission.
STATEWIDE ISSUES: REGULATORY &
LEGISLATIVE AFFAIRS
Goal: Analyze and implement an optimal long-term organizational, management, and information technology structure at VCE.
ORGANIZATION, WORKPLACE &
TECHNOLOGY
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 41 Item 17 – VCE Strategic Major Update Process: Guidelines Strategic Plan Guidelines
Initial strategic plan “Rolling” update in 2023 (completed) • One-year extension in 2024
• Maintain a three-year outlook starting in 2023.
Strategic Plan Schedule for Regular Updates (Major and Minor) beginning in 2025 • Major updates every four years that do not align with Integrated Resource Plan (IRP) updates • Minor Updates by Staff every other intervening year
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Minor
Update
Major
Update
Minor
Update
Major
Update
Minor
Update
Major
Update
IRP WORK IRP WORK IRP WORK IRP WORK IRP WORK
Extension of 2021-2023 Plan Strategic Plan Strategic Plan The Strategic Plan incorporates the following schedule for status reporting:
• Quarterly Report to VCE Management – Staff reports quarterly to the Executive Officer on the status of goals, objectives and metrics under their responsibility.
• Annual Report to Board and CAC - Staff reports annually to the Board and CAC on the status of goals, objectives and metrics, and recommends any mitigations or amendments as may be necessary for Board approval.
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 42 Item 17 – VCE Strategic Major Update Process: Major Update Key Objectives of Strategic Plan Major Updates
Major Update – The purpose is a more detailed review/update of the Strategic Plan, including a review of VCE’s Vision/Mission and existing goals and objectives. Major Plan updates may include more comprehensive reviews incorporating workshops at various levels of the organization, including community stakeholder engagement. The baseline activities would incorporate those enumerated in the Minor Update.
Key activities in a Major Update include:
• Identify changes in the overall CCA environment (economics, policy, technology, etc.) and describe their relevance for VCE
• Review key organizational fundamentals (Mission, Vision, and Strategic Plan Goals) • Long-term adjustments based on strategic and customer requirements Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 43 Item 17 – VCE Strategic Major Update Process: Timeline Proposed Plan Development Process and Timeline
The Major Plan update is organized into four components that will occur over the course of 2025.
• Q1 – Review of existing Plan and development of Initial Draft Plan Update • Q2 – Gather community and stakeholder feedback on Draft Plan Update • Q3 – Develop Draft Plan Update; present Draft Plan Update to Board • Q4 – Develop final Draft Plan Update; present to Board for adoption Timeline: 2025 Strategic Plan Major Update
January
Form CAC Task Group
March
Survey / Community Feedback Review
June
Community Stakeholder Outreach
July
CAC Task Group Review
August
CAC Review
September
Board Workshop
November
Board Adoption
Item X – Short Title and Slide Description [Calibri (Body) 29 font (not bold)] 44 Item 17 – VCE Strategic Major Update Process: Discussion Discussion