9/10/2024 Item5
City Council
Item 5 RTC 24-46 - Action on
CIT Electric Revenue Bonds
1852
THE MISSION CITA
September 10, 2024
1 - SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Agenda
• Background
• Financing Plan
• Financing Timeline
• Fiscal Impact
• Recommendation
2 POST MEETING MATERIAL
1 9/10/2024 Item5
•SILICON
VALLEY
POWER
CITY OF SANTA CLARA
Financing Team
• City Staff: Kathleen Hughes, DeAnna Hilbrants, Robert Valentukonis, Yanmei Qiu, Linh Lam, Jensen Barna, Randy Piotrowski
• Bond & Disclosure Counsel: Stradling Yocca Carlson & Rauth - Cecilia Dyba and Jon Guz
• Municipal Advisor: PFM Financial Advisors - Mike Berwanger • Underwriters:
- Senior Manager: J.P. Morgan Securities - Will Frymann - Co-managers: RBC Capital Markets - Greg Dawley, Seibert Williams Shank & Co. - Grace Yuen
3 SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Electric System Growth
• SVP has continued to see increased energ.
consumption averaging 6% over the last 3 year
• Recorded a new peak load of 705 MW in July 2024
• In September 2021, City Council accepted SVP's
Three-Year System Growth Plan
• In November 2022, City Council also accepted SVP's
System Expansion Plan
• Three projects to be financed:
- Kifer Receiving Station (KRS) Rebuild
- Scott Receiving Station (SRS) Rebuild
- Northern Receiving Station (NRS) Upgrades
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9/10/2024 Item 5
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Capital Project Funding
• Projects are funded thru
Rates
• Load Development Fee (LDF)
• Combination of rates and LDF
• Or fully developer funded
• Over the last 3 years LDF was increased by
approximately 150%
• FY 2023/24 - $674 Million Retail Sales Revenues
- Residential $40 million
- Industrial customers $608 million
• Sales expected to double in the next 10 years
5 SILICON
VALLEY
POWER.
STANTA CAR
Capital Project Funding
• Funded through Load Development Fees (new SILICON
customers), Rate Payers (existing customers), or VALLEY Fiscal Year combination of both POWER. 2021/2022
CITY OF SANTACLARA
• Funding split depends on whether the project is adding Residential Connection & Commercial Load Development Fee Analvsis
capacity or replacing infrastructure
• Example For Discussion Only - Scott Receiving Station • Replacement of end-of-life equipment and expansion to accommodate growth
• Project Construction estimated at $110 million
• 35% Load Development Fee and 65% Rate Payers
• $38.5 million from LDF
$71.5 million from rate payers (existing customers)
$65.8 million from Industrial (1300 meters)
$4-3 million from Residential (51,000 meters)
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9/10/2024 Item5
SILICON
VALLEY
POWER
CRY OF SANTA CLARA
Scott and Kifer Receiving Stations
• Estimated Cost: $229 million
• Full rebuild and expansion
• Replaces end of life infrastructure and increases
capacity
• SRS constructed 1968 and KRS in 1975 Scott Receiving Station (SRS) • Schedule
• 90% Design Underway
• Major Material Procurement (In-Progress)
• Anticipated Construction | Est Start Q2 2025
Kifer Receiving Station (KRS)
SILICON
VALLEY
POWER:
CITY OF SANTA CLARA
Northern Receiving Station
• Estimated Cost: $147 million
• Relocation of two existing PG&E 115 kV overhead
connections and CAISO meters, replacing with
larger transformers, upgrade of existing
main/transfer bus configurations, circuit breakers,
disconnect switches and system protection
improvements
• Schedule Nortbern Recelving Station
• 60% Design Underway
• Major Material Procurement (In-Progress)
• Anticipated construction start in Q3 2025
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9/10/2024 Item5
* SILICON
VALLEY
POWER
CITY OF SANTA CLARA
Material and Equipment Costs
• Purchase of High Voltage Transformers (RTC #23-122) with a not to exceed amount of $60.6 million
• Purchase of High Voltage Circuit Breakers (RTC #24-35) with a not to exceed amount of $38.0 million
• Purchase of Switches and Transformers (RTC #24-435) with a not to exceed amount of $17.4 million
• Upcoming Purchases - Control Enclosure & Panels & Capacitor Bank (NRS) • "It is anticipated that these purchases will be funded as part of a debt issuance. SVP is expected to seek Council approval for the issuance of Debt Financing in 2024. If debt financing is not approved, an alternative funding mechanism would need to be identified...."
9 SILICON
• VALLEY
POWER.
OTY OF SANTA CARA
Finance Plan Summary
Issuance #2
tal Project Co Issuance #1 (u)
ith Contingen Construction, Testing,
Design/Equipment/Material Closeout
SRS $110 Million $35 Million $75 Million
KRS $ 117 Million $35 Million $84 Million
NRS $147 Million $60 Million $87 Million
$376 Million $130 Million $246 Million
Issuance Cost $ 0.7 Million $ 0.7 Million
Interest Rate
Contingency $12.3 Million $23.3 Million
Not-to-Exceed
Total $143 Million $266 Million
(")Existing expenses paid to date with other funds will be reimbursed through this issuance and used for other projects. • Seeking approval for the first issuance, $143 million not-to-exceed • Contingency included in not-to-exceed amount to cover market and interest rate exposure
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9/10/2024 Item5
SILICON
VALLEY
POWER
CITY OF SANTA CLARA
Financing Plan
• The financing plan contemplates two debt issuances to fund all three projects
- Issuance #1 - Design, Equipment, Material
- Issuance #2 - Construction, Testing, Closeout
• Splitting across two issuances
- Reduce carrying costs
- Align with work planned
11 SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Why Debt Finance?
• Limit impacts to cash reserves and liquidity
- SRS, KRS and NRS projects have total estimated cost of $376 million
• Rates
- Avoid sudden or large rate increases to Santa Clara customers • Intergenerational Equity
- Share cost burden between current and future rate payers who will benefit from system improvements
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9/10/2024 Item5
- SILICON
• VALLEY
POWER.
CITY OF SANTA CLARA
Bond Structure
• Bond debt service will only be paid out of net revenues of the electric system
• Approximate use of proceeds:
Project Fund: $130,000,000
Issuance Costs: 700,000
Contingency: 12,300,000
Total: $143,000,000
• Fixed rate bonds, structured to provide level debt service over 20 years • Estimated annual debt service payment of ~$9 million
• Estimated True Interest Cost (TIC) 3.42%
13 * SILICON
•VALLEY
POWER
CITY OF SANTA CLARA
Financing Timeline (To Date)
• May 2023: Council adopts Resolution 23-9223, which
noted SVP's intention to fund KRS and SRS Rebuild
and NRS Upgrades with tax-exempt debt
• May 2023: SVP Staff, Legal Counsel and Municipal
Advisor start analysis of financing options for KRS, SRS and NRS projects
• Multiple staff reports discuss future bond financing
• April 2024: Financing team starts work on legal
documents and disclosure
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9/10/2024 Item5
SILICON
VALLEY
POWER
OTT OF SANTA CLARA
Financing Timeline (Upcoming)
• September 10, 2024: Council considers Resolution to
approve documents and financing
• September 11, 2024: Rating Agency Presentation
• September 24, 2024: Post Preliminary Official
Statement
• October 2, 2024: Negotiated sale of bonds and
determination of final pricing
• October 23, 2024: Closing and receipt of bond proceeds 15 •SILICON
• VALLEY
POWER.
CITY OF SANTA CLABA
Fiscal Impact
• Estimated annual debt service payments of ~$9 million, to be paid out of net electric system revenues
• Future issuance of ~$270 million planned for 2025, to fund the balance of project costs. This amount is subject to align with future contracts
• Both issuances have been accounted for in the long-range financial plan and rate structure
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9/10/2024 Item5
- SILICON
VALLEY
POWER
CITY OF SANTA CLARA
Recommendation
• Authorize issuance of the Electric Revenue Bonds, Series 2024 A subject to the terms set forth in the Authorizing Resolution; • Approve the Preliminary Official Statement, the Fourth Supplemental Electric Revenue Bond Indenture, the Bond
Purchase Contract, and the Continuing Disclosure Agreement • Authorize applicable City officers to modify these documents to reflect the terms of the sale, subject to the requirements of the Authorizing Resolution
• Authorize certain City officers or designees to execute all required documents necessary for the sale and delivery of the bonds 17 City Council
Item 5 RTC 24-46 - Action on
CITY OF
Electric Revenue Bonds
1852
THE MISSION CIT
September 10, 2024
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