San José Clean
Energy
Revolving
Credit
Agreement
Presenters:
Julia H. Cooper, Director of Finance
Lori Mitchell, Director of Community Energy
Council Agenda: 12/13/2022
Item: 3.4
File: 22-1842
WHY DOES SJCE NEED A NEW CREDIT FACILITY?
• Collateral for medium-term power purchase agreements
• Collateral to mitigate risk factors resulting from the volatility in power supply markets
• CPUC regulatory requirements
CCAs are required to post a Financial Security Requirement (FSR) with investor-owned utilities operating in their service territory, the default Provider of Last Resort
Due to pending regulation, the FSR may increase significantly beyond SJCE’s current access to letters of credit for collateral
2 SJCE CURRENT ACCESS TO CREDIT
Facilities Bank
Expiration
Date
Facility
Amount Outstanding
COMMERCIAL PAPER
City of San José Financing Authority U.S. Bank 3/24/2025 $95,000,000 $60,000,000
REVOLVING CREDIT FACILITY
San José Clean Energy Barclays Bank PLC 11/27/2023 $65,000,000 $10,193,920 TOTAL $160,000,000 $70,193,920
3 PROCUREMENT PROCESS
• Request for Proposals was issued on October 7, 2022
• 24 financial institutions were noticed, with JPMorgan submitting the only proposal
• Due diligence call occurred between the City and JPMorgan on November 14
• Notice of Intent to Award issued on November 17
• Multiple discussions subsequently held between City and JPMorgan on covenants and key business terms of the agreement
4 KEY TERMS OF THE AGREEMENT
• Revolving Credit Facility up to $250 million for a five-year term, with three sub-facilities:
$50 million line of credit for general corporate purposes $100 million letter of credit for a term of 2 years
$100 million letter of credit for a term of 5 years
• Obligations under the Credit Facility will be secured solely by SJCE’s net revenues (i.e., NOT the General Fund)
• Current Barclays agreement will be terminated with the execution of the JPMorgan credit agreement
5 JPMORGAN FEE STRUCTURE
6 1. SOFR is the secured overnight financing rate published by New Y ork Federal Reserve Bank.
2. ABR stands for alternate base rate, which is benchmarked against the prime rate or the New Y ork Federal Reserve Bank rate. • Maximum fees are estimated not to exceed $2.5 million per annum. • 1% letter of credit (LOC) fees for outstanding LOCs
• Undrawn fees and applicable interest rates for loans are as follows:
Commitment
Utilization Undrawn Fee
Applicable Rate
T erm Benchmark Borrowing ABR Borrowing
≥ 25% 0.57% Adjusted T erm SOFR1 +1.425% ABR2 + 0.425%
< 25% 0.60% Adjusted T erm SOFR +1.500% ABR + 0.500%
RECOMMENDA TION
• Adopt a resolution authoring the City Manager, the Director of Finance, the Assistant Director of Finance, and their authorized designees to negotiate, execute, and deliver a revolving credit agreement with JPMorgan Chase Bank, N.A., to issue revolving loans and letters of credit up to $250,000,000
• Adopt 2022-23 Appropriation Ordinance amendments
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