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