Published on 12/03/2024
Sonoma Clean Power (SCP), the public power provider serving nearly all of Sonoma and Mendocino Counties, has issued its first bond for the purpose of lowering the cost of renewable energy. The $775,590,000 municipal non-recourse Clean Energy Project Revenue Bonds were issued through the California Community Choice Financing Authority (CCCFA) and is expected to reduce SCP’s renewable energy costs by more than $47 million over the initial seven and a half year period of the bond issue, or an average of just over $6.2 million annually.
The savings from this prepay transaction are guaranteed until 2032, at which time the bond will be repriced. The bond received an investment-grade A1 rating from Moody’s and a ‘Green Bonds’ designation by Kestrel Verifiers.
The entire Sonoma Clean Power team is extremely pleased with the outcome of the financing. We were able to execute a transaction in a volatile interest rate environment, resulting in some of the highest savings ever achieved on a prepayment transaction.
Chief Financial Officer
Sonoma Clean Power
Energy prepayment bonds are long-term financial transactions available to public agencies like SCP to provide power procurement cost savings. “SCP has proactively taken steps to take advantage of its tax-exempt status to reduce power costs and provide cost reductions to lower rates, fund customer incentives, and invest in local energy resources,” said Geof Syphers, CEO of Sonoma Clean Power.
A Clean Energy Project Revenue Bond is a form of wholesale electricity prepayment that requires three key parties: a tax-exempt public electricity retailer (SCP in this transaction), a taxable energy supplier (J Aron & Company, LLC in this transaction), and a municipal bond issuer (CCCFA in this transaction). The three parties then enter into long-term power supply agreements for zero-emission clean electricity sources such as solar, wind, and geothermal. The municipal bond issuer issues tax-exempt bonds (underwritten by Goldman Sachs in this transaction) to fund a prepayment of energy that will be delivered over 30 years. The energy supplier provides a discount to the tax-exempt public electricity retailer in exchange for the prepayment of power purchases funded by the bond proceeds.
SCP has assigned a combination of geothermal, wind, solar, and solar plus battery storage projects into this prepay transaction. The bonds will be utilized to prepay the purchase of a combined capacity of almost 300 megawatts (MW) of renewable energy. For the prepayment bond transaction, SCP was advised by municipal financial advisor Public Financial Management and by the law firm Chapman and Cutler.
