plum point project municipal energy agency of mississippi geoffrey wilson executive director
TRANSCRIPT
Plum Point ProjectMunicipal Energy Agency of
MississippiGeoffrey WilsonExecutive Director
MEAM
•Joint Action Agency
•Municipal utility members
•undivided 6% interest
•$103 mm bond issue
MEAM
•MEAM used convertible PPA
•Power purchase agreement with right to convert to equity
Other partners
• East Texas Electric Coop• LSP• Missouri Joint Action Agency• Empire (IOU)• Arkansas munis - select
• Other buyers• SMEPA
• “Culture Clash” between:– Co-ops– IPP/developer– Joint action agencies/muni’s– IOU’s
• Difference in:– Risk evaluation– Path to financing– Project evaluation
• Diversity made a stronger project
Diverse participants
• Longer financing timeline– Public notice
• Require more definitive transmission timeline– Lower risk threshold
JAA/Muni’s
• JAA Requirements for PPA are less than for bond issue and ownership of assets
• Financing process slower for municipals– Public notice process – up to 60 day– Timing of public meetings– Some are simultaneous
Why a convertible PPA
• MEAM had 60 days after developer closing to convert.
• MEAM had 90 days after conversion to achieve financing
Attributes
• 30 days between transmission answer and financial close
• Not enough time to ramp up bond financing effort
• Can’t “pre-do” public notice process
Critical Decision Point
• Desire to get EPC executed– Cost escalation– Vendor fabrication queue
• allow developer/partners to close financing– Get project going
• Delay ownership execution as long as possible• Close in orderly fashion
– Bond insurance– Ratings presentations– Public notice procedures
Drivers
• Bridge financing alternative– Interest rates
• Conversion – financing “breakage” fees– Interest rate swaps
• PPA still attractive
Trade-offs
• PPA– Higher imbedded interest rate– Lower construction risk
• Ownership– Lower cost– Asset life
PPA/Ownership trade-offs
• Not rushed– Make sure all parties are aware of:– Obligations– Costs– Economics– Contingencies
• All MEAM and municipal approvals were unanimous.
Time
• For muni, several closings have to take place simultaneously:– Bond closing– Financial close– Project closing/participation close
• Muni can’t close project, then close financing later..
Muni Bond Closing
Bond Buyer Magazine
November 2006