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HomeMy WebLinkAboutItem 2C: EWEB Short-Term Borrowing ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Adoption of Resolution 4973 Authorizing an Electric Utility System Line of Credit Agreement in the Aggregate Principal Amount of not to Exceed Forty-Six Million Three Hundred and Fifty-Five Thousand Dollars ($46,355,000) for the Purpose of Financing and Refinancing the Harvest Wind Project and Providing for Related Matters Meeting Date: May 11, 2009 Agenda Item Number: 2C Department: Central Services Staff Contact: Sue Cutsogeorge www.eugene-or.gov Contact Telephone Number: 682-5589 ISSUE STATEMENT Eugene Water & Electric Board (EWEB) is requesting authority to proceed with the financing of the Harvest Wind Project. The authorization consists of two separate financing resolutions. The first resolution (this item, 2C) is for the issuance of an Electric Utility System line of credit agreement in an amount not to exceed $46,355,000, and the second resolution (item 2D) is for the issuance of Electric Utility System, Refunding Revenue Bonds in the amount of $46,355,000 to provide long-term financing for the project. BACKGROUND In the fall of 2007, EWEB was approached about its interest in the Harvest Wind Project (Project). The Project is a new phase of the White Creek wind generation development in Klickitat County, Washington. After a due diligence review with staff, EWEB decided to join Cowlitz PUD, Lakeview Light and Power, and Peninsula Light in developing the Project. EWEB’s share of the project is about 20 megawatts of a 100 megawatt capacity. EWEB criteria for participating in such projects are found in its Integrated Electric Resource Plan (Plan). The Plan establishes goals for the acquisition of the community’s energy requirements over a 20- year timeframe and was adopted by the EWEB Board in 2004, after extensive community and citizen participation. The Plan’s top three resource development priorities in order of preference include: 1.Conservation 2.Local and renewable distributed co-generation/combined heat and power systems 3.Renewable resources including wind, geothermal, biomass and solar EWEB continually evaluates resource development opportunities for environmental, social, and economic impacts. During the 2007 legislative session, a renewable energy bill was passed creating a renewable portfolio standard under which utilities like EWEB would be required to derive twenty-five percent of its annual retail electricity sales from renewable energy resources by 2025. The impact of this and similar standards in California and Washington has been to drive up the monetary value of the Z:\CMO\2009 Council Agendas\M090511\S0905112C.doc environmental attributes of renewable projects such as Harvest Wind. The Harvest Wind Project will help EWEB obtain compliance with this standard. Given current energy market conditions, the Harvest Wind Project is expected to provide long-term economic value as well. In regard to the current actions requested, there are two financing mechanisms authorized in the proposed resolutions (items 2C and 2D on the council calendar). With the first resolution, EWEB would enter into a line of credit agreement for the Electric Utility System for a maximum amount of $46,355,000. The line of credit would provide EWEB the short-term financing for its share of the construction costs of the project. Over the next few months, the goal is to obtain a private investor that would buy the project and receive the tax benefits. As a result, EWEB would then pay down the line of credit from the proceeds received from the private investor. If a private investor cannot be found, the back-up plan is to use revenue bonds previously authorized by the voters to provide long-term financing for the project. The second resolution authorizes issuance of Electric Utility System Refunding Revenue Bonds in the amount of $46,355,000. On February 17, 1993, the council adopted Resolution No. 4360 authorizing the issuance and sale of Electric System Revenue Bonds in an aggregate amount not to exceed $150,000,000 for the acquisition of certain improvements to the electric system. On May 18, 1993, voters approved issuance of the like amount of bonds for electricity generation, acquisition of energy conservation, and the purchase and acquisition of transmission capability. Of the amount authorized, $103,645,000 has been issued to-date. The bond resolution under council item 2D sets terms and conditions by which the council would authorize the issuance of the $46,355,000 remaining under the $150 million authorization. The bond proceeds would be used to pay off the line of credit and/or to enter into a long-term contract for the pre- purchase of wind power or for financing the acquisition of a share in the Harvest Wind Project over a longer period of time in the event a private investor cannot be secured. The proposed financings could have an impact on electric rates. The retail rate impact will be two percent or less based on a worst-case scenario for wholesale power prices. If a tax partner is ultimately obtained, the rate effect would be reduced to zero. RELATED CITY POLICIES There are no City policies related to this item. COUNCIL OPTIONS The council can approve or not approve this resolution. If the council does not approve the resolution, EWEB would not be able to issue a line of credit to finance the construction of the wind project and EWEB would reassess its involvement in the project. CITY MANAGER’S RECOMMENDATION The City Manager recommends approval of the resolution. Z:\CMO\2009 Council Agendas\M090511\S0905112C.doc SUGGESTED MOTION Move to adopt Resolution 4973 authorizing an Electric Utility System Line of Credit Agreement in the aggregate principal amount of not to exceed forty-six million three hundred and fifty-five thousand dollars ($46,355,000) for the purpose of financing and refinancing the Harvest Wind Project and providing for related matters. ATTACHMENTS A. Resolution FOR MORE INFORMATION Staff Contact: Sue Cutsogeorge Telephone: 682-5589 Staff E-Mail: Sue.L.Cutsogeorge@ci.eugene.or.us EWEB Contact: Cathy Bloom Telephone: 344-6311 ext. 3277 E-Mail: Cathy.Bloom@eweb.org Z:\CMO\2009 Council Agendas\M090511\S0905112C.doc ATTACHMENT A RESOLUTION NO. ____ A RESOLUTION AUTHORIZING AN ELECTRIC UTILITY SYSTEM LINE OF CREDIT AGREEMENT IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED FORTY-SIX MILLION THREE HUNDRED FIFTY-FIVE THOUSAND DOLLARS ($46,355,000) FOR THE PURPOSE OF FINANCING AND REFINANCING THE HARVEST WIND PROJECT AND PROVIDING FOR RELATED MATTERS The City Council of the City of Eugene finds that: A. EWEB has requested by resolution that the City Council adopt this Resolution in part to set the terms for an electric utility system line of credit agreement in the maximum principal amount of not to exceed $46,355,000 (the “Harvest Wind Project Interim Financing”), for the purpose of financing and refinancing the acquisition of an interest in and construction of new capital facilities in the State of Washington, to be known as the Harvest Wind Project (the “Project”), whether through an output prepayment contract, acquisition of an undivided interest in the Project or otherwise, to fund necessary reserves, and to pay the costs of issuance of the Harvest Wind Project Interim Financing. B. On June 16, 1986, EWEB adopted a resolution authorizing and providing for the issuance, from time to time, of City of Eugene, Oregon Electric Utility System Revenue Bonds to be equally and ratably secured by the pledge of revenues, funds and accounts thereunder (as amended and supplemented, the “Bond Resolution”). C. The Bond Resolution provides in part that the principal of, premium, if any, and interest on the bonds issued thereunder shall not be payable from any funds of the City nor constitute a general obligation of the City or create a charge upon the tax revenues or any other property or revenues of the City. D. The Bond Resolution does not prohibit, and EWEB has by resolution undertaken to authorize and provide for, the issuance, from time to time, of bonds, notes, certificates, warrants or other evidences of indebtedness for any corporate use or purpose relating to the Electric Utility System payable as to principal and interest from the Revenues subject and subordinate to the deposits and credits required to be made to the Bond Resolution, or from securing such bonds, notes, certificates, warrants or other evidences of indebtedness and the payment thereof by a lien and pledge on the Revenues junior and inferior to the lien and pledge on the Revenues in the Bond Resolution created for the payment and security of the bonds issued under the Bond Resolution. E. EWEB has by resolution undertaken to provide that the principal of, premium, if any, and interest on such subordinate lien obligations shall not be payable from any funds of the City nor constitute a general obligation of the City or create a charge upon the tax revenues or any other property or revenues of the City. F. Oregon Revised Statutes 287A.180(1)(b) authorizes a public body to issue revenue bonds for the purposes of providing interim financing for capital projects to be undertaken by the public body. Oregon Revised Statues 287A.150 authorizes a public body to issue revenue bonds for the purpose of financing capital projects to be undertaken by the public body. On February 17, 1993, the City Council adopted Resolution No. 4360 to authorize the City, acing though EWEB, to issue revenue bonds for the purpose of financing improvements to the City’s electric utility system and setting forth other terms and conditions, including the requirement for approval by the City’s electors at an election to be held on May 18, 1993. On May 18, 1993, the City’s electors approved the issuance of such revenue bonds. G. EWEB has by resolution undertaken to cause to be prepared a plan showing that EWEB’s estimated Electric Utility System revenues are sufficient to pay the estimated debt service on obligations issued to refund the Harvest Wind Project Interim Financing authorized by this Resolution. H. To the extent that the expenditures and the use of proceeds of the Harvest Wind Project Interim Financing may qualify under federal tax law and regulations, the City, including EWEB, intends for the interest on such bonds to be excludable from gross income for federal income tax purposes under §103 of the Internal Revenue Code of 1986, as amended (the “Code”). I. The City and EWEB anticipate incurring expenditures (“Expenditures”) to finance the costs of the Project and wish to declare their official intent to reimburse themselves for the Expenditures made on the Project from the proceeds of the Harvest Wind Project Interim Financing. J. EWEB expects that the Harvest Wind Project Interim Financing will be repaid either from the proceeds of the sale of the Project to a private investor, or from the proceeds of Electric Utility System Refunding Revenue Bonds previously authorized by the voters. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EUGENE, a municipal corporation of the State of Oregon, as follows: Section 1. Authorization of Harvest Wind Project Interim Financing; Purpose of Issue. Based on the above findings, the City Council hereby authorizes EWEB, on behalf of the City, to enter into the Harvest Wind Project Interim Financing, in the aggregate principal amount of not to exceed $46,355,000, on a tax-exempt or taxable basis, as parity or subordinate lien Bonds, for the purpose of financing and refinancing the Project, whether through an output prepayment contract, acquisition of an undivided interest in the Project or otherwise, to fund necessary reserves, and to pay the costs of issuance of the Harvest Wind Project Interim Financing. Section 2. Conditions of Issuance and Sale. The City Council hereby prescribes that: (a)The Harvest Wind Project Interim Financing shall (i) mature not later than one (1) year from its dated date; (ii) have an interest rate per year equal to (1) the BBA LIBOR Daily Floating Rate (as defined in the Harvest Wind Project Interim Financing) plus 1.20% (sub- ject to a floor of 1.95%), or (2) the LIBOR Fixed Rate (as defined in the Harvest Wind Project 2 Interim Financing) plus 1.20% (subject to a floor of 1.95%); (iii) an upfront fee of fifteen basis points per annum and an unused commitment fee of fifty basis points per annum of the aggregate principal amount; and (iv) not exceed $46,355,000 in aggregate principal amount. (b)The proceeds of the Harvest Wind Project Interim Financing shall be used only for the purposes above described. (c) At any one time the maximum amount of outstanding Refunding Bonds and outstanding Harvest Wind Interim Financing shall not exceed $46,355,000, less any amount placed in an irrevocable escrow to refund the Harvest Wind Interim Financing. Section 3. Delegation of Authority for Terms of Harvest Wind Project Interim Financing; Provisions for Issuance. Pursuant to ORS 287A.300, the EWEB Treasurer or Assistant Treasurer, or any individual designated by EWEB, is hereby authorized and directed to determine, with respect to the Harvest Wind Project Interim Financing, the form of obligation and series designation, the manner of disbursement of proceeds, the maturity dates, principal amounts, redemption provisions, denominations, form and authorized signatory and other terms and conditions of the Harvest Wind Project Interim Financing because the same cannot be determined by the City Council at this time. Prior to entering into the Harvest Wind Project Interim Financing, EWEB shall: (i) prepare a plan showing that the estimated Electric Utility System revenues are sufficient to pay the estimated debt service on obligations to be issued to refund the Harvest Wind Interim Financing; (ii) adopt a supplemental bond resolution and provide a copy of such resolution to the City; and (iii) provide to the City a resolution determining that any and all acts, conditions and things required to exist, to happen and to be performed precedent to and in entering into the Harvest Wind Project Interim Financing, exist, have happened and have been performed in due time, form and manner as required by the Constitution and statutes of the State of Oregon, the Charter of the City of Eugene and this Resolution. Section 4. Declaring Intent To Reimburse. The City reasonably anticipates that the City and EWEB may incur preliminary expenditures, cost of issuance and other project expenditures that qualify as “Original Expenditures” under Treasury Regulation §1.150-2 prior to the date of issuance of the Harvest Wind Project Interim Financing, and hereby declares its official intent to reimburse itself or EWEB with proceeds of the Harvest Wind Project Interim Financing in an amount not to exceed $46,355,000. Section 5. Statement on Form of Harvest Wind Project Interim Financing. The Harvest Wind Project Interim Financing shall include a statement on its face to the effect: (a)That it does not in any manner constitute a general obligation of EWEB or of the City, or create a charge upon the tax revenues of the City, or upon any other revenues or property of the City, or property of EWEB, but is a charge upon and are payable solely from the revenues of the Electric Utility System operated by EWEB, or any portion thereof, pledged to the payment thereof; and (b)That the holders thereof may look for repayment only to the revenues of the Electric Utility System that are pledged for the payment thereof, and may not directly or 3 indirectly be paid or compensated through the property of the City, or EWEB, or by or through the taxing power of the City. Section 6. Harvest Wind Project Interim Financing Payable Solely from Revenues. The Harvest Wind Project Interim Financing shall not be a general obligation of the City, nor a charge upon its tax revenues, but shall be payable solely from the revenues and funds (including refunding obligations) that EWEB pledges to the payment thereof pursuant to ORS 287A.310 and ORS 287A.325, the Bond Authorization and in accordance with this Resolution and any supplemental bond resolutions of EWEB. Section 7. Harvest Wind Project Interim Financing Reporting. EWEB shall submit to the City by May 1 of each year the following annual reports commencing after entering into the Harvest Wind Project Interim Financing and each year thereafter until the Harvest Wind Project Interim Financing has been paid and retired: (a)A report on the funds for Harvest Wind Project Interim Financing describing the funds established, the amounts in each fund, expenditure from each fund, the manner in which the monies in each fund have been invested, the income from such investments and the application of such income; and (b)A report on Harvest Wind Project Interim Financing payments describing amounts paid and amounts scheduled to be paid and the source of such payments. If the contents of the reports required by subsections (a) and (b) above are included in the yearly audit report of EWEB, then EWEB may comply with this Section 7 by transmitting a copy of its yearly audit report to the City. Section 8. Appointment of Professionals. EWEB is authorized to appoint bond counsel, disclosure counsel, financial advisors, a registrar and paying agent and any other professional assistance that EWEB determines is necessary or convenient to accomplish the Harvest Wind Project Interim Financing. Section 9. Disclosure and Sale Documents. EWEB or any party designated by EWEB is authorized to prepare and distribute or direct the preparation and distribution of any disclosure document(s) for the Harvest Wind Project Interim Financing as determined to be necessary by EWEB, to obtain bond insurance or other credit enhancement or commitments therefor, if required, to obtain a rating on the Harvest Wind Project Interim Financing from Moody’s Investors Service, Inc., Standard & Poor’s and/or Fitch Ratings, or from such other bond rating agency as may be nationally recognized at the time of issuance, if required. Section 10. Effective Date of Resolution. This Resolution shall become effective immediately upon its adoption. th The foregoing Resolution adopted by the City Council this 11 day of May, 2009. City Recorder 4