Plum Point Project
Municipal Energy Agency of
Mississippi
Geoffrey Wilson
Executive 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
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East Texas Electric Coop
LSP
Missouri Joint Action Agency
Empire (IOU)
Arkansas munis - select
• Other buyers
• SMEPA
Diverse participants
• “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
JAA/Muni’s
• Longer financing timeline
– Public notice
• Require more definitive transmission
timeline
– Lower risk threshold
Why a convertible PPA
• 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
Attributes
• MEAM had 60 days after developer
closing to convert.
• MEAM had 90 days after conversion to
achieve financing
Critical Decision Point
• 30 days between transmission answer and
financial close
• Not enough time to ramp up bond
financing effort
• Can’t “pre-do” public notice process
Drivers
• 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
Trade-offs
• Bridge financing alternative
– Interest rates
• Conversion
– financing “breakage” fees
– Interest rate swaps
• PPA still attractive
PPA/Ownership trade-offs
• PPA
– Higher imbedded interest rate
– Lower construction risk
• Ownership
– Lower cost
– Asset life
Time
• Not rushed
– Make sure all parties are aware of:
– Obligations
– Costs
– Economics
– Contingencies
• All MEAM and municipal approvals were
unanimous.
Muni Bond Closing
• 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..
Bond Buyer Magazine
November 2006