Agency that helps provide power to Alexandria to issue $141 million in bondsThe Western Minnesota Municipal Power Agency (WMMPA) will close December 2 on a $141-million power supply revenue bond issue.
By: Staff Report, Alexandria Echo Press
The Western Minnesota Municipal Power Agency (WMMPA) will close December 2 on a $141-million power supply revenue bond issue.
WMMPA provides financing for electric utility-related projects on behalf of Missouri River Energy Services, which has 60 member municipal electric systems – including the city of Alexandria.
There will be three series of bonds and they will be used to refinance higher-interest debt and to fund construction of new transmission facilities and power plant upgrades.
WMMPA has a power supply agreement with Missouri River Energy Services (MRES) that entitles MRES to the output and use of all of the power generating and transmission facilities that WMMPA has financed. The two organizations also have an agreement under which MRES provides administrative services for WMMPA.
The first series will consist of $9 million in tax-exempt bonds to refinance older bonds. These will have maturity dates of 2017 and 2018. The second series of bonds also will be used for refinancing of older bonds. This $32 million issue will be taxable and will carry maturity dates of 2012, 2013, and 2016.
Almost $100 million in Build America Bonds or BABs will make up the third series. BABs are taxable, but because Western Minnesota is eligible to issue tax-exempt debt, it will receive a payment from the U.S. Treasury equal to 35 percent of the interest on those bonds. “The net cost of these bonds will be significantly lower than the cost would have been under traditional tax-exempt financing,” said MRES Finance Director and CFO Merlin Sawyer.
The BABs will mature in 2046 and will fund the WMMPA/MRES share of the CapX 2020 Fargo Project, as well as upgrades to the Laramie River Station. The Fargo project involves construction of new electric transmission facilities in the region. The Laramie River Station, a coal-fired power plant located in Wyoming, is the principal generating resource serving MRES members. “The reason for the long maturity of the third series is to take advantage of the current low long-term interest rates. While interest rates have increased in the last few weeks, the net interest rate on these bonds is the lowest ever realized by WMMPA for similar maturities,” Sawyer said.
Citi was the senior manager, with Barclays as co-manager for all three series of bonds. The true interest cost will be 4.37 percent.
Fitch Ratings has given the WMMPA bonds a rating of AA- with a stable outlook. WMMPA is one of just a few joint-action agencies in the nation to earn a rating in the double A category from Fitch. Meanwhile, Moody’s Investors Service had an A1 rating on the bonds and changed its outlook on WMMPA’s bonds from stable to positive.