Plum Point Project Municipal Energy Agency of Mississippi Geoffrey Wilson Executive Director.
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Transcript of Plum Point Project Municipal Energy Agency of Mississippi Geoffrey Wilson Executive Director.
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